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Linking with Xero - Account Code selections and Integration Options

Account Code Selections

Part of setting up the link with Xero involves setting the default accounts to post revenue, expenses and payments received when sending and invoice in Tradify to Xero.

There are also various integration options that you can choose, that changes the way Tradify interacts with Xero. This article explains the purpose of each account code selection as well as the other integration options.

There are four default Account Code selections:

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Sales of Labour & the Sales of Materials Accounts

Tradify uses these accounts to post Revenue or Income derived from Labour and Materials, as they appear on Customer Invoices.  

These must be allocated to a Revenue/Sales or Income Account Type in Xero as shown below.

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The default account codes in this account type range, based on a default Chart of Accounts in Xero, are 200 to 299.  As shown in the Tradify image above, they have been allocated to 200 - Sales and 260 Other Revenue, but you can select whichever accounts you want in the Sales Account Type range.   Of course you can also create additional Sales Accounts in Xero specific for this purpose and name them according to whatever is more appropriate for your needs.

You have the option of splitting the Sales posting for Labour and Materials, however, they can also be posted to the same account if required.  Splitting them between two different Sales Accounts allows you to see at a glance, in your financial reporting in Xero, the Revenue/Income derived from Labour and the Income derived from the Sale of Materials.

The accounts set in Tradify under Settings > Accounting System are defaults that apply to Labour and Material lines entered on a Customer's invoice.

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The Account Codes can be altered on the invoice lines, unless they have been hard coded on the individual Billing Rates or Price List Items.

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Sales or Purchase Account Codes entered on individual Price List Items or Billing Rates (see below) overwrite the default Account Codes that apply to the invoice lines from the Accounting System settings and become hard coded.  They therefore cannot be changed on the invoice lines.

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In the example below you will notice the two extra lines added to the invoice as per the Price List Item and Billing Rates shown above.  Notice how the Account Codes set on these items, appears on the invoice lines and are different to the defaults.

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While you are still able to edit the Account Codes for these lines on the invoice, the system will ignore what is entered on the line and use the Account Codes specified on the individual Billing Rate and Price List Item record.

This option provides an additional level of integration with Xero where specific Item codes can be posted to different Sales & Purchase Account Codes where required.  If the Account Code fields on each Billing Rate or Price List Item are left blank, the default Account Codes specified in the Accounting System set up will apply to the invoice lines.

Bank Account

Tradify uses this account to post Payments Received from customers, as they are applied to invoices created in Tradify.  The account selected here must either be a Bank Account or an Asset type account which has the option "Enable Payments to this Account" selected in the account set up in Xero. 

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An example of where this would be used is where you wish to post Cheques and Cash payments received, which are then later deposited in the main Bank Current/Cheque Account, so that your bank statement will reflect the transactions as they occur.

Under Settings > Invoice, Quote & Purchase Settings > Payment Methods tab, you are able to set which Account Code is to be used for each payment method.

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Each Payment Method has a place where you can define the Bank or Payments Account you wish to post Payments Received to.

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Purchases Account

Tradify uses this account to post the value of purchases derived from Bills sent to Xero from Tradify.  

These must be allocated to an Expense/Cost of Sales or Direct Cost Account Type in Xero as shown below. 

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The default account codes in this account type range, based on a default Chart of Accounts in Xero, are 300 to 599.  

As shown in the Tradify image below, the Purchases Account has been allocated to 300 - Purchases, but you can select whichever accounts you want in the Expenses Account Type range.  

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Of course you can also create additional Purchase Accounts in Xero specific for this purpose and name them according to whatever is more appropriate for your needs.

This account selection is also a default that can be overwritten either manually or by the hard coded account specification set on individual item codes.

 

Integration Options

The Integration Options below control how Tradify interacts with Xero when sending invoices through to the Accounting System 

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The options can be turned on or off as needs change, but it is important to understand the implications of making changes.

This article will explain what each option is used for and how it impacts the integration of Tradify & Xero.

1 - Use Xero invoice numbering sequence - With this option selected, Tradify defers to Xero to assign a number to an invoice created and approved in Tradify.

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For this reason when you approve an invoice in Tradify, it has to send it to Xero in the same step so the invoice number can be determined and allocated accordingly.  The Approve button on the invoice screen therefore reads, "Approve & Send to Xero".  Please Note: This option should be selected if at any stage you intend to produce an Invoice in Xero without it originating in Tradify in any shape or form.

When this option is deselected, the invoice numbering sequence can be set in Tradify under Settings > Invoice, Quote & Purchase Settings.  Invoices generated in Tradify can then be approved and only need to be "Sent to Xero" at a point that the user decides, (typically when the customer has approved the invoice for payment).  

Tradify also monitors the paid status of the invoice up to the point it is "Sent to Xero".  The Invoice can also be "Reset to Draft" status (see "Options" button on the invoice screen) so it can be altered or edited as needed and then approved again afterwards.  You will also notice that the Approve button on the invoice screen therefore reads, "Approve".  The option to "Send to Xero" then resides under the "Options" button in the Invoice screen and also on the Invoice list screen.

This option provides the most flexibility when producing and managing invoices and is therefore recommended, however, this does require that ALL invoicing be done in Tradify.

 

2 - Send Invoices and Bills to Xero as drafts - When this option is selected, upaid invoices that are sent to Xero, are created in Xero with a "Draft" status.

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This then requires the invoice to be approved further in Xero to move them to the "Awaiting Payment" status.  If the a payment is applied to the invoice in Tradify prior to approving and sending it through to Xero, then this option is bypassed and the invoice is created in Xero with a paid status.

When this option is deselected, the invoices that are sent to Xero, are created there with an "Approved" or "Awaiting Payment" status.

 

3 - Send invoice description to Xero -

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In Tradify the Job Description automatically copies to the Invoice Description when generating an invoice as shown below:

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Example of Job Description copying to Invoice Description field.

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When the option "Send invoice description to Xero" is selected, the Invoice Description is added to the invoice line detail in Xero when the invoice is sent there from Tradify.  

Using this option allows the user in Xero to see more details pertaining to the Job that the invoice relates to and since there is no specific Job Description field in Xero, this is added to the line detail as a text line. (see example below)

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When this option is deselected, the Job Description is not included in the Xero invoice.

 

4 - Create inventory items in Xero -

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When this option is selected, Tradify either creates Inventory Items to correspond with the Price List Items on the line detail of a Tradify invoice or it updates existing Inventory Items to match the Price List Items in Tradify. 

When this option is deselected, only the Price List Item description, quantity and unit price is sent across to the Xero invoice, with no item code.

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Essentially no corresponding Inventory Item is created or updated in Xero.

There is a distinct advantage to choosing to replicate inventory items in Xero as it provides additional sales and purchase analysis by item reporting in Xero.

 

5 - Send files to Xero

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When this option is selected, any files attached to an invoice in Tradify under the Notes section, are added to the file attachment section on the corresponding Xero invoice.

When this option is deselected, the files are note sent through to Xero with the invoice from Tradify.  Essentially they are only maintained in Tradify. 

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