Understanding Xero Accounts Payable Workflow

Xero cloud-based accounting software (competing with QuickBooks) uses standard workflows related to accounts payable, as detailed in our step-by-step article. Get more out of your Xero accounts payable software for growing and small businesses with add-on integration for AP automation to leverage your Xero software AP workflows.

Xero Workflow #1: Record Bill or Invoice Payments

Record bill payments in Xero online accounting software or its mobile app for Android or iOS devices if you have role approval in Xero. If this is a full bill payment, the bill moves to the Paid Tab. 

If it’s a partial payment or overpayment, the bill remains in the Awaiting Payments tab. The payment transaction for recurring billing only affects one current transaction. Remove any erroneous overpayment applied to a bill in Xero web. 

Steps in Xero for recording a bill payment are:

1. Business menu > Bills to pay > Awaiting payments tab
2. Open the bill being paid to record the payment 
3. Scroll to the Make a payment box on that bill page
4. Enter payment information in the payment field data boxes, including:
   1. Amount Paid
   2. Date Paid (dropdown menu)
   3. Paid From (dropdown menu)
   4. Reference
5. Optionally add a note to the transaction (as history, without editing functionality):
   1. Click Add note
   2. Type note
   3. Click Save
6. Click Add payment

Note that Xero Central Support shows different steps for Invoice payment by clients of accountants and bookkeepers who are using Xero Practice Manager. 

Xero Workflow #2: Manage Suppliers

Add, edit, archive, and restore suppliers in Xero through the Contacts Menu used to manage Suppliers. 

Add a Supplier

Although you can import suppliers into Xero, we list the steps for manually adding a supplier in the Xero accounting solution.

Steps to add a supplier in Xero are:

1. >Contacts menu
2. >Suppliers > New contact
3. Enter the Contact Information fields data.
   1. Contact Name equals how payment (like a check) should read
   2. Account Number
   3. Primary Person (First Name) (Last Name)
   4. Email
   5. Phone
   6. Fax
   7. Mobile 
   8. Direct Dial
   9. Skype Name/Number
   10. Website
   11. Postal Address (remittance address)
   12. Street Address (physical location)
4. Enter only supplier-related Financial Details fields data
   1. Purchase Settings (dropdown menu – select an option)
      1. Tax-inclusive (VAT included in Unit Price line items)
      2. Tax exclusive (shows VAT tax separately on purchase orders and bills created for suppliers)
      3. No tax (if not required to pay VAT tax) 
   2. Default account (or dropdown menu to code account)
   3. VAT – Tax (dropdown menu to choose and enter number) and enter Default purchases VAT
5. Company Registration Number
6. Batch payments (enter the supplier’s payment details if batches are used for payments)
   1. Currency
   2. Bank Acount Number
   3. Bank Account Name
   4. Details (Type of supplier bank account (Business checking, etc.)
7. Bills Due Date: Enter a number of days + dropdown menu choices, as follows:
   1. of the following month
   2. day(s) after the bill date
   3. day(s) after the end of the billing month
   4. of the current month
8. Invoices Due Date (steps are the same as Bills Due Date)
9. Xero Network Key: Click the link for instructions to send an invitation to the supplier/then Save (use this field only if the supplier is also a Xero user with a Xero Network key)
   1. Suppliers can send bills through Xero
   2. Your business can pay suppliers through Xero
10. >Save
11. On next screen, attach any Contract or other document by clicking the Document icon (this screen also has an Edit button)

Edit a Supplier

1. Go to the Contacts screen
2. Click on a Supplier’s Name to select
3. >Edit button
4. Make any desired changes in the Contact Information or Financial Details section of the screen that appears
5. >Save 

Archive and Restore a Supplier

When you no longer do business with a supplier, archive the supplier to view existing contact details and transactions. You can’t add new transactions once a supplier is archived. Xero doesn’t let you delete a supplier. If you begin using the supplier again, you can Restore the supplier from the Archive. 

Archive a Supplier

The steps to Archive a supplier are as follows:

1. Go to the Contacts screen
2. Check the box before the supplier’s contact name
3. > Options button
4. >Archive from dropdown menu > Archive button in the popup menu to confirm Archive Contacts for the supplier
5. The first time that you Archive a Customer a new Category on the left menu is Archived (with the number of archived contacts); the number changes for any additional Archive activity

Restore a Supplier

Steps to Restore an Archived supplier are:

1. Go to the Contacts screen
2. Click on the left menu, Archived category
3. Click on the Archived supplier’s name
4. Click the Restore button
5. Click on the Restore button to confirm Restore (the supplier) in the popup menu.

Xero Workflow #3: Submit, Reimburse, and Manage Employee Expenses

Xero Expenses is an additional module (Suite) from Xero. Choose to claim expenses from the integrated Xero Expenses module software or the Xero Me mobile app. 

The steps for how Xero lets employees expense claims and the company handles expense reimbursement are as follows:

If you use Xero Expenses cloud software:

1. Go to Business/Expense Claims
2. Set up Expenses
   1. Receipt analysis
   2. Expense claim codes
   3. Mileage claim accounts
   4. Roles for your team
3. Get started
4. Go to settings (edit any expense settings like entering bank account or credit card account for expenses and download a mobile app)
5. Business/Expense Claims
6. Choose Your own (to submit and view submitted claims),To review, To Pay, All, or Explorer
7. Your own – New Expense dropdown menu – choose expense claim or mileage claim
8. Expense claim – Left side of screen – Upload image (of receipt)
9. Right side of screen: itemise if multiple items on receipt and enter any missing information in fields for financial information, including amount, description, spent at, spent on date, account coding, etc. When complete, Save, Submit, or Approve the expense claim. 
10. For paying expense claims: Go to Business/Expense Claims/To pay – Click on an Expense Claim link and enter amounts and follow steps to Make a payment, with Amount Paid, Date Paid, Paid From, Reference and click Add Payment button. 

If you use the mobile app:

11. Go to the Xero Me mobile app
12. Snap a photo of the receipt or record mileage for reimbursement
13. Xero Me expenses app automatically pulls the data into a claim
14. Approvers are notified of the claim electronically to Approve or Decline with a button
15. Approved expenses are Paid
16. You can tag expenses by type
17. Review dashboards of real-time expenses to manage spending

Xero Workflow #4: Enter Supplier Bills

The steps to enter supplier bills in Xero accounting software are as follows:

1. >Business>Bills to Pay/New Bill
2. From: Enter supplier name or choose supplier name from Xero and click +New contact button if new supplier 
3. Date: Today’s date as default or change date
4. Due Date: Use the calendar for supplier invoice due or Xero shortcuts from Xero Central to enter Due Date
5. Reference: Enter bill or invoice number
6. Amounts are: Choose No Tax or other option from dropdown menu
7. Item: Select from your saved products or services list (automatically populating line item fields) or select New Item and key in, enter check in checkbox “I purchase this item”, enter Unit Price, select a Purchases account from your chart of accounts, and an option from Tax Rate dropdown menu (for example, No VAT), and Purchases Description to describe the item
8. Check box “I sell this item”, if applicable to enter Unit price (selling price), Sales Account, and Tax Rate (from dropdown menu), and Sales Description to describe the item
9. Check box “I track this item”, if applicable (for example choose an Inventory asset account from the dropdown menu) 
10. Click Save on New Item screen 
11. Click Save on New Item screen 
12. In the New Bill screen, enter to complete each line item field that hasn’t populated yet, including Qty
13. Click Assign expenses to a customer button, if applicable
14. Click a button to Add a new line on the supplier invoice
15. Choose Tax Rate from dropdown menu (for example No VAT) if not already populated from the New item screen 
16. Compare your Xero supplier Bill total to the supplier’s actual bill total for accuracy (Bill Total should be the same)
17. When accounts are coded, and supplier invoice is approved, your financial reports are updated in real-time
18. Approvers with role authorisation can Approve with a button in this New Bill screen or choose Save and Submit for Approval if not authorised to approve in the Save dropdown menu
19. Click the Paper icon to upload and attach the actual bill from the supplier 
20. Or use the Email to Bills feature in Xero instead
    1. > Business
    2. > Bills to pay
    3. > Create bill from email
       1. Click your business’s unique Xero email address shown to copy it to a clipboard.
       2. Go to your business email account.
       3. Forward the email with a PDF formatted bill to that unique Xero email address
       4. Bill appears as a Draft, is viewable, and shows as attached in the Xero Paper icon on the Bills to Pay screen

Xero Workflow #5: Pay Bills from Suppliers or Vendors

Steps to pay suppliers or vendors in Xero accounting software are:

1. > Business > Bills to pay > Awaiting payments
2. > Click the Schedule Payments button and > Click the Schedule of planned payment link for a date shown to view all scheduled invoices for the date
3. > Click the top checkbox by Ref to schedule all payments for a date shown or check individual invoices to include in a batch payment
4. > Click the Batch Payment button and confirm with the OK button in the popup screen to reach New Batch Payment Screen
5. Be sure the supplier’s bank account data has been saved in the Contacts section for these suppliers
6. > Click the Make Payments button to record the transaction in Xero
7. > Click the Export Batch File button to download the file to your computer
8. Log in to your bank account and Import the file to initiate payments to the suppliers (which includes the needed information)
9. Xero also includes a link for how to email remittance advice to each supplier in the New Batch Payments screen

Besides accounts payable processes, Xero lets you perform easy bank reconciliations, including these book vs. bank transactions, using bank feeds as one of the user-friendly Xero features. 

Xero + Mass Payments Software 

You can combine Xero with third-party add-on Mass Payments software. Tipalti mass payments software lets you pay partners, independent contractors, and suppliers in 196 countries and 120 currencies. Choose from multiple payment methods allowable in the payment recipient’s country. 

Payment methods Tipalti offers in the U.K. are:

1. Global ACH
2. PayPal
3. Wire transfer
4. Prepaid debit card
5. Paper check

Look for additional payment methods that Tipalti will be offering. 

Besides integrating with accounting software and ERP systems, Tipalti also integrates with some performance marketing software platforms that measure the payment amounts due to certain types of partners. 

Streamlining Workflows with Xero + AP Automation

AP automation with Xero streamlines workflows for invoice processing using best practices. For a Tipalti/Xero AP automation demo, view this Tipalti YouTube video. 

Invoice processing covers workflows between receiving the supplier invoice and paying it after the approval process. Tipalti AP automation includes 3-way or 2-way invoice matching with the purchase order and receiving documents data and guided approvals workflow. 

With the integration of AP automation, your business will maximize its investment in Xero accounting software through a combined accounting system. Integrate AP automation software with Xero to eliminate the manual data entry that the detailed Xero workflow steps described in this article require. Your business will eliminate 80% of end-to-end payables process workflow, gaining efficiency and reducing hiring needs. 

Tipalti provides a self-service supplier onboarding portal to gather contact and preferred payment method information. Suppliers can upload electronic invoices into the portal, email digital invoices, or use OCR scanning in Tipalti to capture headings and line item data. Your suppliers receive payment status notifications through the supplier portal and by email. 

Tipalti reconciles large payment batches with multiple payment methods in real-time, speeding your accounting close by 25%. 

For Xero accounts payable automation, you can choose to also integrate a third-party Expenses automation software product instead of using the extra Xero Expenses suite for employee expense management and reimbursement. 

Handling Fraud Prevention with Xero + AP Automation

Using the best AP automation for Xero integration and employee expense claim submission and reimbursement software with Xero accounting software gives you additional fraud risk reduction benefits. 

Tipalti AP Automation + Xero

Tipalti AP automation software integrated with Xero accounting software validates suppliers, automates electronic invoice data capture, automates 3-way matching, and screens payments using over 26,000 business rules to trigger exceptions for possible fraud or errors requiring investigation before routing invoice approvals. Tipalti provides document management and an audit trail for the AP process.

Efficient Tipalti AP automation scales with business growth, as complexity and the number of invoices increases, and lets your company reduce its AP team hiring needs. With Tipalti, your accounts payable and invoice processing, including global payments, will have less human errors. Tipalti AP automation performs automated real-time batch payments reconciliation. Your accounting team will not need to use Google or Microsoft Excel spreadsheets, accelerating the financial close by 25%.

As a third-party integration, when used in combination with Tipalti AP automation software, Tipalti Expenses automates the employee expense claim submission and reimbursement process that automatically handles company expense policy compliance to reduce fraud when reimbursing valid and reasonable employee business expenses.

Automatic Accounting Journal Entries for Accounts Payable in Xero 

Xero alone generates some automatic and repeating journal entries. With AP automation software integrated with Xero, your business can automate journal entries in real time for transactions generated by the add-on software. The fields are mapped between the software programs to sync data for business accounting. 

Reports and Dashboards with Xero and Add-on AP Automation Software

Add-on AP automation software gives you additional reports and real-time analytical dashboards. Tipalti also provides the AP turnover ratio and other statistical trends and metrics for managing payables. 

Before making payments, you’ll see cash flow requirements for paying large batches as part of your payment processes. 

Summarizing Accounts Payable in Xero

Xero provides basic accounts payable, requiring many manual steps for its detailed workflows. Your business should consider automating and improving Xero cloud accounting accounts payables functionality with Tipalti’s cloud-based third-party add-on software for AP automation, mass payments, and Expenses for more workflow reliability and efficiency. Tipalti offers excellent customer support. 

When you complete invoice processing efficiently, you’ll be able to increase profitability by taking early payment discounts on time, in compliance with invoice payment terms. Request a demo to get started.