Mark Invoices As Paid
When you use Xero coupled with bank feeds it is great as it speeds up the process and completing the bank reconciliation. But how often do you reconcile the bank? Daily, weekly, monthly? If we are honest we probably do not do it each day in which case you will have invoices in your system showing as outstanding when in fact they may have been paid.
If you have multiple people accessing your Xero, perhaps you have a bookkeeper for example it would be good practice to mark items as paid when you know you will receive the money. Instances where this might occur are when you have received a remittance advice which is future dated or you have received a cheque payment which you will not cash straight away. By marking the invoices as paid it means you won’t chase down customers for payments that they have already paid. These are the sort of things that can really annoy customers.
How do you mark an invoice as paid in Xero?
This is quite simple to do.
Accounts > Sales > Awaiting Payments > Search (use the search facility to find the customer or invoice)
Click on the invoice and in the bottom right hand corner you will see the Receive a payment box. Here you can enter the details of the receipt being the amount received, the date paid (i.e. the date the remittance advice says it will be deposited), which bank account it was paid into and lastly the reference (this can be the paying in slip number if a cheque). Then click Add Payment.
If you are receiving money that pays multiple invoices then we would not recommend doing it this way but to use the batch deposit option. In the example below you can see that we have highlighted two invoices as they were both paid at the same time by the customer as one amount. As Xero is intuitive and tries to auto suggest the right allocation during the bank reconciliation by doing things in this way when the £2,245 hits the bank account then Xero will try and match it to the £2,245 we have entered into the system. If we do two separate amount of £1,995 and £250 it will not make the suggestion as they do not match.
Once you have ticked the invoices being paid click the Deposit button next to the Email button.
Complete the date, reference and the bank account that the receipt will be paid into. The Deposit button will then become green and you can can click on it.
Your sales invoices in Xero will be marked as paid and no longer show as awaiting payment and a receipt will be entered into the bank account ready for the person who does the bank reconciliation to tie up to the bank feed.
What you might notice is that when you use Find & Match to allocate bank lines there are invoices that show with a single green arrow as shown below which are invoices that have not been marked as received. The double green arrows are the receipts that you have allocated against the invoices as per the method above.
If we are doing the bookkeeping on behalf of clients we would normally suggest where practical that they mark the sales invoices as received. We will normally be looking at the bank reconciliation once a week so if you want to keep the sales ledger as up to date as possible then mark the invoices as received.