Xero and pro-formas

Workarounds for payments in advance?

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So Xero does not have a dedicated Pro-Forma invoice template and was wondering how others get around when treating payments in advance of a service being supplied?

I was thinking of raising a quote to the customer, with the terms added at the bottom "THIS IS NOT A VAT INVOICE". It will be coded to Deferred Revenue (Current Liability). Once payment is received, it is turned into an invoice and the payment is applied, then I would email the customer the VAT invoice. 

Once the service is performed I would create a journal to DR Deferred Revenue and CR Sales Revenue

Are there better methods than the above?

 

 

Replies (7)

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By Cloudcounter
30th Mar 2017 15:54

You are on the right track. There is a video in the Xero help on how to do this but I can't find it at the moment.

Within quotes, you can go to branding themes, and copy the default theme. Instead of the heading Quote, change it to Pro Forma Invoice. You can then create the quote for the client, and use that theme to send it out.

When the client pays, you can leave the quote untouched if the service hasn't been performed. Record the money coming in as a prepayment, rather than a direct payment and code that to a deferred income account.

When the job is done, you can convert the quote to an invoice and the system should then prompt you to allocate the prepayment against the invoice. The invoice can be coded to the correct revenue account

It might be a bit of a chore if you have other invoices going out to the same client as the system will ask you about the prepayment every time, but it works well in an assignment based business

Thanks (1)
Replying to Cloudcounter:
Melchett
By thestudyman
30th Mar 2017 16:32

Cloudcounter wrote:

You are on the right track. There is a video in the Xero help on how to do this but I can't find it at the moment.

Within quotes, you can go to branding themes, and copy the default theme. Instead of the heading Quote, change it to Pro Forma Invoice. You can then create the quote for the client, and use that theme to send it out.

When the client pays, you can leave the quote untouched if the service hasn't been performed. Record the money coming in as a prepayment, rather than a direct payment and code that to a deferred income account.

When the job is done, you can convert the quote to an invoice and the system should then prompt you to allocate the prepayment against the invoice. The invoice can be coded to the correct revenue account

It might be a bit of a chore if you have other invoices going out to the same client as the system will ask you about the prepayment every time, but it works well in an assignment based business

Thats very useful, thank you.

Regarding the issue of the VAT invoice, we would sometimes get bookings weeks and months in advance of a major event we host. So to clarify:

1) a VAT invoice should only be issued once the service is supplied, or at the date of payment of the pro-forma?
2) The tax point should be the date of payment received by the customer?

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Replying to thestudyman:
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By Cloudcounter
30th Mar 2017 16:39

2 - the tax point would be the date that you receive payment. Xero's prepayment accounts for this correctly

1- Personally I wouldn't send a VAT invoice on receipt of payment, unless of course the customer requests one. It's surprising how few do, but you'd possibly be in the realms of coding the income to a deferred account. I think that I'd only do that if the year end got in the way and wouldn't bother otherwise. But that depends on the extent of management reporting and who is looking at it

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Teignmouth
By Paul Scholes
30th Mar 2017 17:06

Hi - just on the raising of an invoice following payment, this depends on whether your customer is VAT registered in that, if they are, I'm pretty sure you must provide a VAT invoice within 30 days.

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Replying to Paul Scholes:
Melchett
By thestudyman
30th Mar 2017 17:19

Paul Scholes wrote:

Hi - just on the raising of an invoice following payment, this depends on whether your customer is VAT registered in that, if they are, I'm pretty sure you must provide a VAT invoice within 30 days.

Thanks..is this 30 days from payment or 30 days from supply?

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Replying to thestudyman:
Teignmouth
By Paul Scholes
03rd Apr 2017 10:23

Hi - it's 30 days of the tax point, so generally the earlier of the supply or cash received. See section 16 of VAT notice 700

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By Cloudcounter
31st Mar 2017 10:05

When you process the prepayment in Xero it creates a prepayment invoice. You can populate the descripion field as you wish. Mine just say "on account" but they are generally monthly payments not specific to an assignment. You could copy and paste the blurb from your quote into that and send a copy of that to the client.

That way you leave the deposit in deferred income and then issue a full invoice from the quote when the job is done. Saves the journal entries

Try it out in the dummy company.

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