Does Xero allow receipts by instalment?

What accounting software allows receipts by instalment these days?

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We allow credit: some of our customers pay by 12 monthly instalments. Our bookkeeper set us up on CoCardless with Xero, after taking the advice from the latter which is that we need to have a repeating monthly invoice for 1/12th of the subscription. This gets sent out and is apparently easier to reconcile. The result is not great from my perspective. Each customer now has 12 invoices instead of one per year. I now find that my sales ledger is meaningless as we have lost our debtors and that we are understating actual sales. VAT is fine as we are cash accounting. I can see that this works for SAS when you are say, a software company, but we are not! Who has this as an issue and what is your suggestion to correct it? Xero apparently do not have one. All I want to do is to raise one invoice and then receive 12 payments on account, all matched against that invoice and automatically reconciled. Surely other business have this issue too with Xero - do they manually add their debtors or what?

Replies (15)

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By rmillaree
29th Apr 2024 13:37

Hello Nichola

you want to default to checking all the technical options within the go cardless system - the fact you may have the option to do stuff one way doesnt mean you have to do it that way. I would be sure you dont have to pull anything through to xero if you dont want to and i would guess there will be a toggle even if you do import stuff that you may be able switch off for various elements (invoices?)

Note even if there is no specific option that works its normally easy to sort a fix with xero - so as long as you can export the details of payments received each period or pay date - its not much trouble to have format to copy and paste into excel (for xero upload) so that you would have the individual payments in if you want to match those against invoices individually - typically you would set up a go cardless bank account and import there with funds banked being bank transfer th and fees being brought in as appropriate

Either way trying to match back to annual invoices to monthly payments in xero does create extra time effort where its ongoing monthly payments. If one is practicably speaking taking monthly payments via agreement doing the monthly invoices that match payments and working out another method ref debtors may be the easier way to go - ie simple excel sheet detailing start and end dates would allow for easy reversible debtors adjustments to be done when needed?

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Replying to rmillaree:
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By cbp99
29th Apr 2024 14:28

What an extraordinary palaver to post routine transactions.

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Replying to cbp99:
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By rmillaree
29th Apr 2024 15:03

well one is often between a rock and a hardplace - it will be a palaver posting monthly payments agaists annual invoices for sure as xero doesnt even green highlight it when its part payment.

imho its close to a no brainer to stop posting annual invoices - move to the monthly situation that if the default of go cardless/xero combo - and then adjust your debtors monthly via monthly single entry.

Each to their own though the op has clearly stated that they seem to want to do it the other way

perhaps there is another way i am missing xero does offer some batch functionality so hopefully there is an easy answer i am not thinking of.

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Replying to rmillaree:
Nichola Ross Martin
By Nichola Ross Martin
29th Apr 2024 18:46

rmillaree wrote:

imho its close to a no brainer to stop posting annual invoices - move to the monthly situation that if the default of go cardless/xero combo - and then adjust your debtors monthly via monthly single entry.

Thank you for your suggestions. Well, the thing is that we have to recognise revenue consistently, our KPIs are based on annual targets and we have contracts that last a year, no longer no shorter and don't tie people in for any longer. We can't just be having some kind of hybrid accounting just because Xero thinks that we all work like it does.

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Replying to Nichola Ross Martin:
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By rmillaree
29th Apr 2024 20:01

"We can't just be having some kind of hybrid accounting just because Xero thinks that we all work like it does."

I fully understand that my suggestions may not be viable - it is just an option no more and no less i am not trying to teach anyone to suck eggs here just highlighting some options -

i have similar clients where they keep the sales ledgers on excel where it is an easy once a month adjustment to get that months sales and the amount prepaid into the system - if there is an element of amounts being prepaid anyway ref annual invoices then it may amount to the same volume of journals - just done in different manner to get the same overall effect - anyway feel free to disregard my comments if they are of no use

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By ireallyshouldknowthisbut
29th Apr 2024 14:55

its relatively simple to book multiple payments against a single annual invoice (which can be set as recurring and auto-generated or manually as required), but the key would be to raise the annual invoice in Xero rather than as a push from your payment software.

Its the "split invoice" function then in the bank rec screen to match the payments received to the original invoice.

This function is however more fiddly to do than just treating the monthly payments as revenue vs a monthly installment agaisnt an anual service on a "follow the cash" basis. So there is a genunine trade off question here about management information vs bookkeeping time vs commercial control. There is also a perception quesiton of how you see your business. I would say there is some merit in thinking about it like a continuous service given your customers are pre-paying for an annual service albeit this would not reflect the contractual position.

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By Ghostbusters
29th Apr 2024 14:57

You can do this within GoCardless for Xero. Just set the invoice due date to be after the final instalment will become due, so that automatic collection of the whole thing isn't triggered at any point. Then, if you go find the invoice in GoCardless for Xero and click the "Actions" button on the right it's easy to set a regular instalment plan with a few clicks.

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By adam.arca
01st May 2024 11:20

Is it just me or do these workarounds sound incredibly fiddly? Should Xero (and others) not be following the accepted bookkeeping norms rather than seeking to impose their own Mickey Mouse versions?

If the OP feels strongly enough about this and the impact upon their KPI measurement, then maybe time to vote with your feet?

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Replying to adam.arca:
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By rmillaree
01st May 2024 12:01

xero does follow the norms - its a choice thing to bring through monthly invoices into xero or not .

Xero doesnt not force anyone to go down the route of bringing these invoices in - it has to be an active decision to get to that point - albeit someone may have clicked a button or signed up for something they didnt mean to do or know teh consequences of

the issue is fundamental to any "system" - if one wants to issue an annual invoice - then get paid in 12 or so installments with those installments being paid to third party who will process batch together and deducts their fees before paying one net payment - any system needs to find the best solution here.

xero simply offers the option to automatically genrate the invoices monthly that tally with payments made - for most people that CAN be an admin saving. if anyone goes down that route - they simply need to tweak their "timing adjusts" to work differently for kpi data - there is nothing complex in doing that - should be no harder than working out sales prepaid if that is already being done ref annual invoices. everyone has their own way of working so i do understand why the op desont want to be forced down any route but xero isnt really the guilty party here imho.

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Replying to rmillaree:
Nichola Ross Martin
By Nichola Ross Martin
01st May 2024 15:26

rmillaree wrote:

xero simply offers the option to automatically genrate the invoices monthly that tally with payments made - for most people that CAN be an admin saving. if anyone goes down that route - they simply need to tweak their "timing adjusts" to work differently for kpi data - there is nothing complex in doing that - should be no harder than working out sales prepaid if that is already being done ref annual invoices. everyone has their own way of working so i do understand why the op desont want to be forced down any route but xero isnt really the guilty party here imho.

It is quite complicated to 'to tweak "timing adjusts"' as it goes! If it were easier we would be doing just that.

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Replying to Nichola Ross Martin:
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By rmillaree
01st May 2024 16:00

doh

you could be right my presumptions could be off mark - life is often not as simple as we would hope it is unfortunately !

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Nichola Ross Martin
By Nichola Ross Martin
01st May 2024 15:33

After discussing this with Xero the result is that:

Xero cannot account for payments received as instalments or payments on account that are received against or paying off one annual invoice, if received from a payment provider.
This is not an issue if one is paid directly i.e. by s/o from a customer or by subscription set up by Paypal as these show in the bank as individual amounts and as such we can match those in Xero and reconcile them as we like. e.g. as part payments against a single invoice.

This means we can set up subscriptions to be paid by instalment in Go Cardless, which then collects the cash for us. But - no automatic invoicing (as we don't want 11 extra invoices when 1 will do and we want to see our Debtors). This then means that we have to manually reconcile the amounts banked from Go Cardless because there is no integration available.

That is it. We are following up on the suggestion above about setting up with Go Cardless to take cash by instalment and putting a later 'due date'. Thank you all for your replies, suggestions and support.

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By Mr_awol
01st May 2024 16:53

Go Cardless and Xero work acceptably if you are on a monthly subscription model and dont mind recognising all of your income on that basis.

If you provide annual services and take monthly payments (particularly if in advance, or a mixture of advance/arrears) and especially if you want to combine that with VAT cash accounting then my honest advice would be to ditch both GoCardless and Xero and use SAGE desktop. There will be a slight admin burden to the bank postings but that will probably be paid for by the savings in GoCardless fees.

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By firtrees
29th May 2024 10:14

Unfortunately the xero seamless integration option does not allow the payment options.

You need to use the old directli software, think gocardless bought it a few years back but it sits in the middle and you can set up installments using this.

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paddle steamer
By DJKL
29th May 2024 10:34

Landmark Software permits , allowing receipt of payments on account unallocated to invoices and partial receipts, however it is aimed at farming and property business entities.

I invoice rents quarterly in advance but permit monthly payments to us. Slightly more faff that matching to individual invoices but tidying it once a quarter works for us (not that many rentals, only circa £100k pa)

However invoicing for a full year's service in advance of performing same does bring its own issues re revenue recognition

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