UPDATE

Xero has now implemented Repeating Manual Journals.  The actually reached out to us for feedback because of this article.   We’ve kept this article here just so that we can gloat – although it is no longer necessary!!

Xero has many great features that speed up data entry and generally make life easy for the small business owner. I love the Bank Rules and memorisation for dealing with the incoming cash transactions. I love the repeating bills and invoices for ensuring that I am watching for recurring payments. But the two things that you can’t create as recurring items are bank transactions and manual journals (at the time of writing).
In this article I will address how to simulate recurring or repeating journals in Xero. This won’t be available to you if you are on the cashbook version (sorry – talk to your accountant or advisor about upgrading).
Repeating journals are very useful when you have prepaid transactions (such as an annual insurance payment or where you give your clients the option to prepay a full year of service) and you want to amortise the amount over the year so that your P&L shows the correct accrued balance.
You could create 12 manual journals and use the copy function and post-date them. But this becomes cumbersome and creates more work if you have to cancel or edit the journals part way through the cycle.
I use recurring bills to achieve this. I prefer to use Bills rather than Receivables because the orientation of the numbers matches a traditional journal entry (positive numbers are debits and negative numbers are credits – you have to reverse this if using Invoices) and the transactions don’t show up on the customer statement.
So let’s take the simple example of an annual billing to a client. The client is paying $100/m + GST in advance.

Step 1 – Invoice the client

The total invoice is to be $1200 + GST (15% in NZ for this example – use the tax rate in your province/country) = $1380. When you invoice the client you do this using a normal invoice but code it to an Income in Advance account (you may need to create this in the Chart of Accounts). Make sure that you correctly charge the GST on the transaction up front.

Step 2 – Create the Amortisation “Journal”

Now, go to Purchases and create a repeating bill. Use the following settings:

  1. Repeat this transaction every: 1 Month(s)
  2. Bill Date: the same as the invoice date (or the start of the service year if this is later)
  3. Due Date: 0 day(s) after the bill date (this field will not be used)
  4. End Date: make this the date of the 12th amortisation instalment (if you leave this blank then this will repeat until cancelled)
  5. Approve
  6. Bill From: use the same contact name as the invoice (bills will not show up on the contact’s accounts receivable statement)
  7. Reference: Use the Invoice Number – this will help match later when you need to reconcile
  8. Total: 0.00
  9. Amounts are: No tax (tax has already been calculated – you don’t want to accidentally do it again)
  10. First coding line:
    1. Description: whatever you want, e.g., “Monthly allocation of annual fee”
    2. Qty: 1
    3. Unit Price: the monthly fee excluding tax e.g., $100
    4. Account: same account you used in the invoice e.g., Income in Advance
    5. Tax Rate: No GST
  11. Second coding line:
    1. Description: whatever you want, e.g., “Monthly allocation of annual fee”
    2. Qty: 1
    3. Unit Price: the monthly fee excluding tax BUT NEGATIVE e.g., $-100
    4. Account: The intended account in the P&L where this item belongs e.g., Sales
    5. Tax Rate: No GST
  12. IMPORTANT: the total of the bill should be zero.


Step 3 – Reconcile the Clearing Account (Annually)

This step is especially if you have multiple items that you are amortising. While in theory everything should balance out we know that due to human error things often go wrong. For year-end accounts purposes you may want to be able to prove what invoices you are still amortizing.

  1. Go to Reports, Account Transactions
  2. Select the clearing account you used (e.g., Income in Advance) and the date range you need to reconcile
  3. Export to Excel
  4. Now you can sort by reference, subtotal and determine what is outstanding.

Still having trouble?

If you are still having trouble getting things working, never fear. Not only is Fuel a Xero Partner, but we have Xero Certified staff. In addition, we are a Xero award-winning firm (2012 Most Valuable Professional award to Peter McCarroll for his contribution to the Xero Community Forum – helping people solve their Xero problems).
Our clients are eligible for our “10 minute no-charge” support policy (conditions apply). If you are not a Fuel Accounting client we can still help – please send an email (getincontrol@fuelaccounting.ca) or call us on 647-367-0876 and we can help you sort out your Xero problems quickly and easily (fees apply).

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