Reporting for your sales automatically and on a daily basis sounds simple, yet this also introduces tremendous accounting efficiencies. This connection between your Xero accounting system and Troly allows for:
- a daily end-of-day sales summary for all connected sales channel (POS, website, wine-club, etc). The Xero Invoice includes sales revenue for each product category, shipping and credit card surcharge revenue, sales taxes and WET component (Australia only). Expected cash and other deposits are also added as partial payments.
- a monthly costs summary covering software, banking, shipping and other comissions for referral sales, if applicable, to properly record costs of doing business. This is recorded in Xero as a Bill.
- trade sales and wholesale transactions (or sales paid "on account" in Troly) including customer details, product breakdown with applicable discounts and also payment terms, are created as individual Xero Invoices allowing you to leverage the automated invoice reminders functionality in Xero.
The following explains the broad function of the the automation.
Bank Accounts vs Accounting Ledgers
This article uses the word "account" repeatedly. Unless otherwise noted this is a reference to a specific accounting ledger in your chart of account and not an actual bank account. Learn more about the Xero Chart of Accounts here.
You must first install the Add-on
The functionalities explained in this article require that you have a working Xero account and and that you first Configure the Xero Add-on.
Daily Sales Invoice and Credit Notes
Everyday Troly creates a new sales invoice into Xero. Each product category which has been sold during the day is reported on a different line with the correct account associated as per your addon configuration. Additional revenue such as shipping or merchant fees are also added as individual line items.
Additionally, if sales taxes were perceived on at least one product sold, the calculated taxes will be passed onto Xero. Depending on your country's regulations with regards to prices expressed as "tax inclusive" or "tax exclusive", this may cause rounding differences as Troly has to remove the tax component for Xero to add it back on. This is due to a limitation into the Xero APIs capability.
If your main business address is in Australia, an additional line is added to report on the calculated WET component for all sales.
Should no sale have taken place on the day, Troly will create a 0-value invoice to indicate the day was successfully processed.
Clearing expected deposits
Invoices pushed may also have payments recorded against them. If you have enabled additional payment types (such as Cash, EFTPOS, cheque, bank transfers, etc), a payment for may be created for the total value transacted for each payment type.
From this point on, you must associate the actual funds received and visible in your bank feed to the same clearing account in order for the total of this account to be "cleared" automatically.
Unfortunately Troly doesn't have any visibility over any upfront withholdings performed by 3rd parties. Should your merchant gateway processor remit funds after fees, then the bill you create in Xero for the provider will also need to add funds to the associated clearing account. Your accountant will be able to further clarify this if required.
On days where refunds are processed, a credit note is created in Xero to allow accurate accounting of sales volume for each for each revenue channel or product category. This credit note must be applied on the current day, or split over the current and subsequent days of sales.
This process is required to allow days with refunds present but no sales as Xero doesn't allow for negative invoices to be created. Further to this, your payment provider may only remit funds once all refunds processed have been balanced by new sales transacted.
Troly & 3rd Party fees withholding
Any monies owed to external providers such as shipping carriers or your merchant gateways, when managed by Troly, are held into an escrow account and recorded as one payment against the "Withholdings" account (subject to your configuration). Your period invoice for Troly-managed services will further breakdown the various fees incurred, and automatically clear this account.
Outstanding invoice balance
Depending on your configuration, the invoice may have an outstanding balance. This balance, after credit notes applied, is equal to the funds transferred to your bank account by Troly. Thanks to this amount matching exactly with the sum received, Xero will facilitate reconciliation work for you.
Invoice to be Paid as "account receivable"
Troly creates additional Xero Invoices, one for each transaction marked as "paid on account". This enable your to better leverage the invoice reminders functionality in Xero in order to get paid with as little effort as possible. This invoice is automatically confirmed by Troly and will show on your Xero dashboard as a receivable.
Processing sales with payment "on account" is not generally available in Troly. To activate this, please review the various payment types you have enabled for your team.
Monthly Bill for Services
At the end of every month, Troly creates a sepaarte invoice Xero detailing your usage of the platform, fees incurred for external services used (such as shipping and banking). These fees are also associated with your configured expense accounts (one or many) and funds placed in escrow are recorded here as payments, to automate end the clearing of this account.
Any outstanding balance is charged to your nominated credit card, and with the invoice total and value charged both matching, Xero will facilitate reconciliation work for you.
More on Clearing Accounts and WET
Revenue, expenses and clearing accounts breakdown
Your are free to nominate a single or many accounts for revenue, expenses, and clearing. In other words, while some prefer a single account to track all revenue, others may chose the more granular approach of electing a different account per product or service type.
Keep in mind that when you change your accounts in Xero, or create a new product category in Troly, you will need to review your configuration in Troly for this Add-on to continue operating as expected.
The same apply to expenses and clearing accounts.
Clearing as "Current Liability" vs "Asset" account
When it comes to clearing accounts some prefer to see these as an asset on a Profit and Loss (P&L) statement while others prefer to treat this as liability.
The choice of how do you or your accoutant prefer 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 so the balance is continually brought back to zero after a short period of time.
Some accountants refer to this as a "Suspense account" and this is not wrong. You can read about this here.
Wine Equalisation Tax (WET) calculations
If you produce, import and ultimately sell wine in Australia, you have to account for the Wine Equalization Tax (WET). Reporting to the Australian Tax Office (ATO) is compulsory and depending on your business circumstances and size, this may by payable.
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 your the daily sales invoice, and allocated to a clearing account of your choosing. Please be aware that WET calculations vary based on sales type and any rebate may vary yearly. Read more on the ATO website about Wine equalisation tax.