Prepayments & Accrual Schedules
Instead of using spreadsheets, it would be very handy for Xero to have prepayment & accruals schedules built-in that act similar to the Fixed Asset function.
For example, when you allocated a new invoice to the prepayment nominal, Xero would detect that transaction and add it to the schedule. At the end of the month, you access the Prepayment & Accruals screen, go to drafts, and fill out a form giving it the period with su[plier, start date, end date and number of days/weeks/months it lasts (this would determine how often a journal is created when ran). Once done, you can then run the prepayments for the month/period and it would create those journals in the frequency you have set (i.e. days = 1 journal per day or months = 1 journal per month).
For Accruals, you could press a button to create an accrual. From here, you would fill out the supplier, amount, start date, end and period (similar to the prepayments section). The Accruals can be ran from the same page as the prepayments. When the invoice relating to that accrual is added to Xero and allocated to the accruals nominal, Xero detects this & puts it in the draft section where the prepayments are. The user would then click on the draft and assign the previously set up accrual schedule to the invoice and would create a journal to release the difference at the end of the accrual schedule.
Scott Brown
shared this idea
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Jonathan Stokes
commented
Often, line items on a supplier bill will relate to an annual period or a month/period other than the calendar month in which the invoice is dated. Manual journals must be calculated and entered to achieve an accurate month-end close for management accounts purposes at present. It would be highly effective and helpful to be able to implement a workflow in Xero whereby the period that charges relate to could be defined at a line item level on a bill, and then automatically create period adjustments (accruals or prepayments calculated based on prorated daily values) to recognise the charges on an accruals basis spread across/within the relevant monthly period(s), with a corresponding report to support the balance of accruals and prepayments at any given balance sheet date.
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Jane Hodgins
commented
I have thought this for ages now. I do actually use the Fixed Assets Register to create prepayments. It's not great because you have to lie to the system and say that the prepayment is a fixed asset when setting up the chart of accounts.
When creating the asset type I use the Balance Sheet prepayment nominal ledger account as both the asset account and accumulated depreciation account. P&L depreciation expense account is the nominal ledger code such as insurance instead of depreciation code. Depreciation method - Straight Line, Averaging method - actual days and Based upon - effective life.
This works well for annual prepayments such as insurances and subscriptions but must admit I haven't sussed out a way to get it to work for say quarterly payments due to the way Xero calculates the monthly amount. The only problem with doing this, whilst it is so much quicker to post journals (it does it whilst you are posting your monthly depreciation) at the end of the year you have to "write off" the prepayment using 0.00 gain. I've found you can change the asset number so I prefix prepayments with PRE- instead of FA- and it also works for accruals after a fashion just the year end write off is a little different, but it's obviously not ideal.
On the Balance Sheet I edit the report to put the nominal ledger codes where they need to be and you can also use the depreciation schedule to create a custom report that is filtered to just select the prepayments. Just remember to create a custom depreciation schedule that only shows the fixed assets. Again though I've found whilst you can change the name of the report to Prepayments Schedule you can't change the column headings so it is showing as depreciation but you can export to excel and change the headings there.
I have one client in particular who has so many professional body subscriptions and software subscriptions it was taking me ages to do the month end journals (even using repeating journals) now it's just one click. However, it would be great if Xero could look at this and create a proper Prepayments Register and Accruals Register based on their Fixed Assets Register.
Thanks.
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Beatrix Schuster
commented
This is absolutely critical in my opinion. I prepay for every one of my clients and currently have to not only run manual excel reports behind the scenes to ensure accuracy but also set each prepayment up separately. This takes far too long even with the option to repeat the prepayments.
I completely agree that it should be set up in the same way as the fixed assets, however, I'm wondering if it can be included as an option on the invoicing screen rather than having to go to another place.
For example what if:
At the point of entering the invoice you have the option to choose to prepay line items on the invoice, add a start and end date and the accounts code it relates to.
All from within the invoice section.I have tried everything available in Xero to come up with an automation for this, it simply doesn't work.
I have clients who raise dozen's of annual invoices that need to be prepaid. This would be such a game changer. -
Joanne Smith
commented
Great idea. Would help our group of companies & save a lot of time!