How to Create Purchase Invoices in Xero

Here we will show you how create a Bill (Purchase Invoice) in Xero.

From the dashboard you will need to click ‘Business’ at the top and then ‘Bills to pay’.

There are multiple tabs; ‘All’ will show you every bill you have including all that are paid, unpaid, drafts etc. ‘Awaiting approval’ will show you pending bills that have been produced or imported but not yet approved by you, awaiting payment will show you just the outstanding bills, ‘Paid’ will show you just the bills that have been paid and ‘Repeating’ will show you any repeating bills you have set up to automatically generate for bills that happen on a regular basis, i.e.rent.

Above this there are buttons for creating a new bill, a credit note, importing or exporting bills. Select ‘New Bills’ and ‘New Bill’ again.

In ‘From’ enter who the bill is from, i.e. EDF, take the date (sometimes known as tax point) and due date off the invoice and type in to Xero. Put the invoice number in Reference.

If the bill is digital you can download it and attach it to the bill in Xero using the button next to the ‘Reference’ box. If it is on paper, you can scan it and do the same.

Then we need to fill in the items on the bill and code it to a cost centre. Fill in a description of what the bill is for in Description, to use EDF as an example again you might put in the dates the bill is for.

In Quantity you can usually put in ‘1’ and then use the whole value of the bill or item. But you could break it down by quantity if, for example, for a manufacturer that needed to know the quantities for reporting/costing reasons.

In unit price put the cost. You can put this as tax exclusive (Net - does not include VAT) or tax inclusive (Gross – Does include VAT) using the dropdown below the total box.

Under account select the appropriate cost centre or create a new one if needed.

In tax rate select what level of VAT is applied to the item on the bill. This will depend on

1) If the company that sent the bill is registered for VAT
2) If you/your company are registered for VAT
3) If the item is vatable (See HMRC guidance here)

If you or the company that sent the bill are not registered for VAT the tax rate will be ‘No VAT’.

In short do not put any VAT if you are not registered for VAT and, if you are, select the tax rate that is on the bill.

The ‘Amount’ box will automatically be filled depending on what you put in the ‘Unit price’ box plus any tax depending on whether you selected tax inclusive or exclusive and the tax rate.

Once you have entered all the details and the total, and VAT, matches what is on the bill you can approve it using the green ‘Approve’ button at the bottom. From here the bill will go to the ‘Awaiting Payment’ tab ready for allocation and will also feed into your reports such as expenses and VAT returns.