Working with Bills and Expenses in Xero
It’s much more gratifying to work with incoming payments, but the money has to go out sometimes, too. Here’s an overview.
Xero provides numerous ways to pay for goods and services that your company needs in Xero. How you do so depends on the type of expenditure you’re creating. The most common options are:
- A one-time bill,
- A repeating bill,
- An expense claim for a business purchase made with personal funds, and
- A direct payment, prepayment, or overpayment submitted from a business account.
To enter a one-time bill, open the Accounts menu and select Purchases. Click the down arrow next to +New and select Bill. If you’ve already populated Xero with contacts and inventory items, this is a fairly straightforward process. Type the first letter of the vendor in the From field, and Xero displays a list of all contacts containing that letter. Make sure the date is correct, and select a due date from the drop-down calendar. Add any reference number necessary, and click the small paper icon if you want to attach a document.
Figure 1: Entering a one-time bill in Xero is simply a matter or filling in the blanks and choosing options from drop-down lists.
Use the same process to complete the line(s) describing the product(s) or service(s) you’re being billed for. When you’re done, select one of the Save options in the lower left.
Note: If you haven’t created records for contacts and items, or if you’re dealing with a new person or item, select +New Item or +New Contact.
If you are in a position to approve payments, it’s easy to locate bills that have been submitted for approval. Return to the main Bills screen (Accounts | Purchases). You’ll see a toolbar that divides your bills into four categories: Draft, Awaiting Approval, Awaiting Payment, and Overdue. Each will have a number in parentheses indicating how many there are in the group.
Click Awaiting Approval to see the list of bills sharing that status. Each entry will have a small, empty box at the beginning of the line. Click in it to create a checkmark, then click the Approve button. You’ll be asked to confirm your action. Click OK to return to the main Bills screen, and click on Awaiting Payment in the toolbar to open that group of bills. Select the one(s) you want to pay, and click Make Payment.
You have two choices here. You can Pay By Check or include those bills in a Batch Payment that will be uploaded to your bank. (If you’re not familiar with the concept of batch payments, let us walk you through it before you pay any bills. This is a complex process that must be done absolutely correctly.)
Figure 2: You’re ready to pay two bills in this screen.
When you click Pay By Check, you’ll see a screen like the one pictured above. Look in the upper left, and make sure you’ve selected the correct bank account and verified that the next check number will be the one you want. Click Save & Print PDF to open the Print Check window, and then click the Print now button when your printer is ready.
There are undoubtedly individuals and businesses that you pay on a regular basis, like your utility company. When this is the case, click on Accounts | Purchases | +New | Repeating bill. You’ll fill out this form like you’re creating a one-time bill, but there’s an additional set of fields at the top of the screen that lets you specify the frequency of the payments, the Bill Date and Due Date, and an End Date if necessary. Click Save as Draft or Approve.
If you as an employee have paid out of pocket for a legitimate business expense, like a cab ride or a meal, go to Accounts | Expense Claims | Add Receipt to record it. Although this is a straightforward process, make sure to include a complete Description of the expense.
Figure 3: Filling out an Expense Claim is a fairly straightforward process. Be sure you enter a complete Description.
Paying Directly from a Business Account
If you don’t have a bill, need to make a prepayment or overpayment, or simply must issue a check from the business for a variety of reasons, you’ll work directly from your bank account. Click Accounts | Bank Accounts. Find the account you want to use and click the down arrow next to the Manage Account button, then Spend Money.
There’s more than one way to do all of these activities in Xero, which you may discover as you explore on your own. But we urge you to schedule a training session or two with us before you start making payments, as it can take a long time to untangle a payment that was made incorrectly.
Dailey Bookkeeping Services is a Xero Certified Bronze Partner and a QuickBooks Online Certified Advisor, so if we can help you with your accounting needs, just give us a call, we would love to help you! The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Bronze Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can! Feel free to visit our website at http://www.