On a day-to-day basis the purpose of the Xero add-on may appear relatively simple however also means tremendous accounting efficiency. This connection with your Xero accounting system allows to account for:
- a daily end-of-day sales summary including sales revenue by product category, shipping and credit card surcharge revenue, sales taxes and WET component (Australia only) as well as expected cash and EFTPOS deposits. This is recorded in Xero as a single Sale Invoice including all sales collated by Troly for the day, regardless of origin (club, website, POS, etc)
- a monthly costs summary including software, banking, shipping and software fees incurred as costs of doing business. This is recorded in Xero as a single Purchase Invoice
- an automated sales invoice for wholesale sales recorded, including customer details, product breakdown with applicable discounts and payment terms. Each is a single Sale Invoice to appear as receivable (ie. not paid)
The following explains the broad function of the the automation.
BANK ACCOUNTS VS ACCOUNTING LEDGERS
This article uses the word “account” quite a few times. Unless otherwise stated this is a reference to a specific ledger in your chart of account, not an actual bank account. Learn more about the Xero Chart of accounts here.
In order for Xero accounting reconciliations to happen, you must first Configure the Xero Add-on.
Daily generation of Sales Invoice and Credit Notes
For every day where sales recorded, Troly pushes a new sales invoice to the accounting system. This daily report contains revenue breakdown by product and services type.
On days where refunds are made using an external payment provider, we will send across a credit note to allow you to make a cash refund against the provider's clearing account.
Expected bank deposits
This invoice pushed every day may also have prepayments recorded. For each broad payment type (cash, EFTPOS, cheque, bank transfers, etc) used on the day, a partial payment will be recorded against a clearing account for later reconciliation.
All monies held for using external third-party services such as banking and shipping are also recorded as one lump prepayment against the “Withholdings” account for later reconciliation, which is also automated.
Outstanding invoice balance
The remaining balance of the invoice to be paid is equal to the funds to be transferred to the Company by Troly. Because this balances exactly with the sum received, Xero will facilitate reconciliation for you.
Invoice payable for trade sales
When required, Troly pushes a sales invoice for each transaction marked as wholesale, trade or “paid on account”. In other words Sales for which there has been no payment received upfront, unlike other direct sales transaction.
This allows using Xero to account for the sale as Account Receivable, as well as general debtor collection automation or “payment reminders”.
This feature is not generally available, please enquire to have this activated on your account.
Monthly bill or purchase invoice
At the end of every month, Troly pushes a Purchase into Xero detailing your usage of the platform, fees incurred for external services used such as shipping and banking, along with prepayments made each day against the Withholdings account, for clearing.
The outstanding balance is charged to your nominated credit card and given the invoice total and value charged both match, Xero will facilitate reconciliation for you.
Revenue, expenses and clearing breakdown
Your are free to nominate as many accounts, or just one single account for revenue, expenses, and clearing. In other words, while some wineries prefer a single Account to track all revenue, others chose a more granular approach, and have one account per product or service type.
Likewise for expenses and clearing. You may choose a single account for each or multiple, making your accounting setup more complex but also more detailed.
Current Liability versus Asset account, for Clearing
When it comes to clearing accounts, some companies prefer to see these as an asset on a Profit and Loss statement while others prefer to treat this as liability.
The choice of how do you decide to report onto these funds makes no difference as to how the account operates; every entry in a clearing account is meant to be “cleared” or negated at some stage. In other words, the balance of this account is meant to be continually brought back to zero.
Some accountants refer to this as a “Suspense account” and this is not wrong. Learn about this here.
Wine equalisation tax calculations (Australia-only)
If you make wine, import wine into Australia or sell it by wholesale, you’ll generally have to account for wine equalization tax (WET). WET is a tax of 29% of the wholesale value of the wine. In some cases (for example cellar door or tasting room sales) the tax also applies to retail sales. Full ATO details here.
Troly calculates the value of the WET component on retail sales using the “Half retail price method“. This value is also pushed to Xero on the daily sales invoice, and allocated to a liability account of your choosing. Note that WET is only calculated against certain products sold; see the configuration for more details.