Purchase Order Process Notes for Xero

A Purchase Order (PO) should always be raised before placing an order with a supplier.  This should be raised in Xero at the cost quoted by the supplier or pricing list used previously.

To raise a PO in Xero:

Go to Account>Purchases

Click on the arrow next to new:

From the dropdown menu, choose Purchase Order at the bottom:

This opens up the new template:

This needs to be as complete as possible.

Contact = Supplier Name  This will obviously find the supplier if they have been used before, and hopefully their contact details will already be loaded in Xero.  If not type the new name.

The date will pre-populate as today's date which should be correct.  You can then also add an expected delivery date, to set your expectation with the supplier from the beginning.

The Order Number will run sequentially, so there should be no need to adjust this.

The Reference can be left blank, or you can add an internal reference (maybe the name of the employee placing the order)

Theme - refers to the template design.  Providing the logo is loaded via financial setting, the template will automatically create a professional design ready for sending to the supplier.

Tax Exclusive - means the amounts you are entering line by line below will be before VAT.  This is the usual method.  However, if you have a supplier who quotes you including VAT, then drop this box down and change to Tax Inclusive.

There is no requirement to enter into the Item field, unless you are using the inventory to track stock bought and sold.

The description field is where you should be adding the majority of the detail regarding the purchase information.

Quantity can be the number of items required, or simply 1 if units not required.  For instance "consultancy services" would not be sold in units, so enter 1.

Unit price is the quoted cost by unit e.g. 4 bolts at £1 per bolt.  Again, if units is not appropriate and you have just entered 1, then you can enter the total amount for the order e.g. Consultancy services 1 @ £1,000.

Disc % is where you can enter a discount, for instance if the supplier offers a 5% discount for orders over £500.  So, enter 5 in this field.

Account will correspond to your nominal codes used on your bills.  For instance, materials, training, consultancy.  This will be individual to your businesses Chart of Account configured in Xero, so by clicking on the drop down you will be able to browse the list for the most appropriate code.

Tax Rate is where you can enter 20% if there is VAT to be added, or exempt if the cost is exempt (e.g. insurance) or zero-rated (no VAT on the transaction).  If you are unsure at this point you can leave it at 20% and then when the bill comes through and shows the VAT element you can edit the bill (see below).

On this example Region identifies the tracking category.  This column may not be present if you have no tracking categories in place, or may appear differently dependant on the categories configured in your Xero.  Again click on the drop down and select the appropriate category.

You will see the Amount will now populate with the total value.

You can now add multiple line items if there is more than one item going on this order.  Clicking on "add a new line" will of course give multiple rows.

You can then select your delivery address.  It will auto populate with the trading address per your Xero settings.  By clicking on the arrow by delivery address, you can select an alternative, or enter a new address if required.

The Attention and Telephone number is there for you to enter the contact details you hold for you account manager at the supplier, or person who provided the quote.

The delivery instructions field is very useful.  You can enter any specific instructions here which should avoid supplier queries, and will hopefully ensure the order goes through smoothly.

You can then attach any paperwork to support the order, for example the quote from the supplier, email correspondence etc. using the attach icon at the top:

Finally, you can save the order if it is still be worked on.  Or, choose approve if it is complete.

Once approved or saved, you can find them in Accounts>Purchases, scroll down:

Those orders saved to be re-visited can be found in "Draft" and those approved in "Approved".  From here you can also see the value of orders out with suppliers, for which we are yet to receive the invoice.

Those orders approved, can then be sent direct from Xero to the supplier.  Click into the approved orders, locate the order in the list and open it.

From here you can send and/or print.

When you click on send, it will open up a pre-populated email to the supplier email address as held in the contact record.  You can of course, edit the email address, add additional recipients etc.  Once happy, click on send and the order will go straight to the supplier along with a PDF of the order.

If your contact record is not complete with the email address, or is out of date go to Contacts>Suppliers:

You can then search for the supplier in question and click into their record:

From here you can see the order we have already raised.  If you click on "edit" the contact details will be bought up, and from here you can add/edit the email address etc.:

Once complete, click save.

When the purchase invoice comes through, find the order as above

Open it, and click on "Mark as Billed"

It will now come up with a pop-up, tick the checkbox to ask for the order to be copied into the bill.

Then click OK

You will now see the draft bill created with the information from the order.  Obviously at this point you can edit anything you wish to change, for example if the account has changed.  You can also adjust the amount if the order was incorrect in anyway, or change the VAT rate to match the invoice.  You must also add the due date for payment.

You can also attach the invoice from your Xero inbox:

Once complete, you can either save as draft or approve.

To find the bill, go to Accounts>Purchases:

Draft will show the bills you have saved, and approved bills will go into awaiting payment.  Overdue invoices are those that have gone past their due date (as populated in the bill).

To add invoices to the Xero inbox in order that they can be attached to the bill as above, click on the folder symbol at the top:

This will show the email address you can use to forward emails with invoices attached, ready to attach to the bill in Xero.

Please note the above email address is for the demo data, please check for you own Xero account address.  You can also upload files from here:

This should complete the order process all the way through to converting to a bill.