Below, you will find explanations for each configuration option in the Xero Integration.
Please be aware that this article is related to Advanced Billing's integration with Xero. The Xero integration syncs based on Advanced Billing statements. You can learn more about the Xero integration by checking out this help article: Xero Integration Overview.
The “Invoice Account” is the Xero account (from the Chart of Accounts) that will be assigned to all invoice line items. We populate this drop-down selection with your accounts from Xero classified as either sales, revenue, or other income.
The “Payment Account” is the Xero account (from the Chart of Accounts) that will be assigned to payments. We populate this drop-down selection with your accounts from Xero classified as either bank accounts or accounts that have payments enabled.
Create Item Codes in Xero
The “Sync product and component names as item codes” option allows you to toggle on/off the integration creating item codes within Xero. If this option is selected we will automatically create item codes in Xero based on your component and product names. These created item codes will be used on all future Xero invoices. After the first sync of an item you can associate a specific sales account with it, outlined later in this documentation. This option can be turned on/off after the configuration has been completed.
Your Xero account must contain all currencies configured within your Advanced Billing site. If your Advanced Billing site makes use of a currency that is not yet configured in Xero, an error message will be displayed and you’ll be prompted to add the missing currencies in your Xero account settings.
Once you have added the currency to your Xero-supported currencies, you will see the appropriate checkmarks.
Taxes (US & Global Versions)
For the US and Global versions of Xero, no tax configuration is necessary. We “auto-sync” the taxes generated by Advanced Billing by automatically creating matching tax rates within Xero.
These taxes have names in the format of
CFYnnn: X% - Tax Name, where
nnn is a three digit number and X represents the effective tax rate.
If you do delete one of these rates in Xero, we will recreate it so the integration will not be broken. However, your tax reporting may be affected, in that the same logical tax will be split across several different Xero tax rates (some of them archived).
If you modify one of these rates in Xero, we will continue to use it, which will cause your Xero invoices to show a “rounding adjustment” to account for the discrepancy.
Taxes (AU, NZ, and UK Versions)
Xero maintains a set of “System Tax Rates” for certain taxes (like GST) in the AU, NZ, and UK versions. In order to make use of these tax rates, you will need to tell us which Advanced Billing taxes map to which Xero system taxes.
For each of your Advanced Billing-defined tax rates, you may pick a system tax from Xero to which it maps or allow us to sync the tax automatically (as described in the section US versions, above). If you wish to use the Xero system tax rates, you must select a specific tax rate – do not select “Sync Automatically” in this case.
Note that, if you choose a tax mapping here, we do not make sure that the rates match - this will be up to you. If you map a 15% tax rate in Advanced Billing to a 10% system tax rate in Xero, Advanced Billing will calculate and charge the 15% correctly, but the Xero invoice will calculate the rate at 10%. As a result, your Xero invoice will show a “rounding adjustment” for the 5% discrepancy. In this case, both sides will show the same totals, but you will not have the tax revenue properly accounted on the Xero side.
Advanced Billing and Xero Tax Information
Advanced Billing supplies tax rate information to Xero and the taxation status of each line item and lets Xero calculate the actual taxes. Differences in totals due to rounding issues are accounted for by adding adjustments via the system rounding account.
Whether you use Advanced Billing Custom Taxes or Avalara Managed Taxes on the Advanced Billing side, we handle the conversion to Xero taxes for you.
Advanced Billing Custom Taxes
Advanced Billing allows you to create multiple taxes, each of which can have multiple tax rules. Depending on your configuration each transaction in Advanced Billing is potentially taxable by multiple taxes and multiple tax rules.
Xero only allows a single tax rate per line item. To account for this, Advanced Billing taxes for any given transaction are “combined” into a single Xero tax rate composed of several Tax Components. Overall, the tax rate we sync to Xero will have the same effective rate as the individual taxes and rules in Advanced Billing.
The lowest available “resolution” for Advanced Billing custom taxes is at the state level. County and local tax jurisdictions cannot be created. If you require tax resolution at the local level, please use the Avalara Managed Taxes described below.
Avalara Managed Taxes
Avalara Managed Taxes allow you to apply specific sales tax rates, down to the local level, for all of your customers. For more general information about this feature, please see the Avalara Managed Sales Tax documentation.
When Avalara Managed Taxes apply to a transaction we record the individual components of that tax. For example, most counties in North Carolina have a 6.75% sales tax rate, which is comprised of a 4.75% state tax, and 2.0% county tax.
We sync such a tax to Xero as a single tax rate with two components – one for the state tax and one for the county tax. These taxes are intelligently labeled on the Xero side, so there will never be a question of what tax was applied.
Mapping to Special Xero System Tax Rates
For the AU, NZ, and UK version of Xero, we allow you to map each Advanced Billing tax to a corresponding system tax rate in Xero. More information on this feature can be found in the section on AU, NZ, and UK Tax Configuration, above.
Taxes on Refunds and Credits
Please note that refunds are always synced to Xero as tax exempt. If the original charge that is being refunded included taxes, you will need to record a Journal Entry to adjust the tax amount.
Most Credit Notes will also sync as tax exempt because there are no taxes associated with the credit in Advanced Billing. An exception to this rule is a prorated credit for a taxable component.
Syncing Advanced Billing Statements to Xero Invoices
A Xero invoice is created whenever an Advanced Billing statement is closed (i.e. at signup, renewal, or upgrade/downgrade). Here are the steps we take when we create an invoice:
- A Xero “contact” is created or updated to match the Advanced Billing customer details.
- All charges (non-tax line items) are assigned to a single Xero sales/revenue account (that you choose during configuration) and added to a new invoice.
- Discounts from coupons are applied to the invoice line items, as applicable.
- Advanced Billing sends taxation information to Xero, but allows Xero to calculate taxes itself based on rates Advanced Billing supplies.
- Any discrepancies between the Advanced Billing statement and the Xero invoice totals (due to rounding issues in tax calculations, for example), are reconciled via a special line item assigned to the system rounding account.
- Unpaid (past due) statements in Advanced Billing are properly reflected as Unpaid Invoices in Xero.
- Payments made via Advanced Billing are recorded in Xero, assigned to the account (bank account) of your choosing and applied to the invoice, marking it as paid.
- Credits in Advanced Billing (i.e. negative charges) are synced to Xero as Credit Notes that get attached to the invoice.
Payment data is not pushed to Xero until a Statement is “settled” in Advanced Billing. This happens when the statement is successfully paid, which could be when the renewal happens, or perhaps later after the payment is retried.
Advanced Billing Invoice Billing
When an invoice is generated in Advanced Billing at renewal, it will be synced to Xero immediately. Invoices that are issued mid-period will not be synced to Xero until the current billing period ends and the statement is settled.
When a payment is applied to the Advanced Billing invoice, this payment is not synced to Xero. If you are using Invoice Billing, you will need to manually record the payments in Xero.
Additionally, charges and credits applied to Advanced Billing Invoices are not synced to Xero. These will need to be manually recorded in Xero.
It is important to note that even if you are using Invoice billing, the basis for syncing data to Xero is statements, which are tied to the billing period. Please review the “How It Works” section for more information on when data will be synced to Xero.