Plain explanations of bills, credit notes, VAT and supplier workflows, with the native steps in Xero, QuickBooks Online and FreeAgent.
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Accounts payable (AP) is the money your business owes suppliers for goods and services it has received but not yet paid for, and the process of recording and paying those bills. The accounts payable process runs from receiving a supplier invoice through checking, coding, approving, paying and reconciling it.
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Draft means a bill is saved but not approved, Awaiting Approval means it has been submitted for approval, Awaiting Payment means it is approved and owed, and Paid means a payment is recorded. Your user role decides whether you can approve a bill yourself or only send it for approval.
Read articleIn Xero you create a purchase order under Purchases, submit it for approval, approve it, email it to the supplier as a PDF, then copy it to a bill when the goods arrive. The order itself never posts to your ledger; only the bill does.
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The Amounts are setting tells Xero whether the figures you type on each line already contain VAT (Tax Inclusive), exclude it (Tax Exclusive), or carry no VAT at all (No Tax). Xero works out VAT line by line and rounds each line to the penny, so the bill total can differ from the supplier invoice by a penny, and you fix it by adjusting the tax amount.
Read articleChoose the transaction that matches how you recorded the original purchase: a vendor credit for bills (called a supplier credit in UK versions), a bank deposit for expenses and cheques, or a credit card credit for card refunds. For a refund on a bill you have already paid, the vendor credit and the bank deposit are linked in Pay bills.
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Go to Bills, select Add new bill, choose the supplier contact, enter the reference, dates, VAT option, category and total, attach the invoice and save. To mark it paid, open the bank account, select the payment and explain it with the type Bill Payment.
Read articleDownload a statement from your online banking as OFX, QIF or CSV, open the bank account in FreeAgent and choose Upload Statement. If your bank only offers CSV, format it as three columns first: date, amount and description.
Read articleFirst check which dates are missing and use a transaction file your bank can supply in a format Xero accepts. If you need to convert a PDF, capture and review its rows in Datamolino. Export them directly to the matching Xero bank account, or download CSV, import it into the correct account and check the preview. Then compare the resulting statement balance with the bank source.
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Use Category details when the line needs an account from your chart of accounts. Use Item details when it needs a product or service from QuickBooks, with fields such as quantity and rate. The choice follows your reporting and inventory setup. Capturing several invoice lines does not, by itself, decide which section they should use.
Read articleA credit note is a document a supplier sends to reduce the amount you owe them, or to confirm they owe you money back. It refers to an earlier invoice and is issued for returned goods, overcharges, price corrections or cancelled orders.
Read articleA purchase ledger is the record of what your business owes each supplier for goods and services bought on credit. It holds one account per supplier, and the balances across all of those accounts add up to your accounts payable figure.
Read articleThree-way matching checks a supplier invoice against the purchase order and the goods received note before you pay it. Two-way matching drops the receipt and compares only the invoice and the purchase order.
Read articleA CIS invoice is a normal subcontractor invoice that separates labour from materials, so the contractor can work out the deduction from the labour alone. If the job is within the VAT domestic reverse charge, it must also say so and must not add VAT to the amount payable.
Read articleCompare the supplier's statement with your purchase ledger balance for that supplier, then explain every difference. Tick each line on both sides, list what does not match, correct your own records and query the supplier about the rest.
Read articleA nominal code is the number of one account in your general ledger, such as sales, rent or printing. Your full list of them is the chart of accounts, and every line on a supplier bill is coded to one.
Read articleA reverse charge invoice shows no VAT charged by the supplier, because you, the UK buyer, account for the VAT on your own VAT return instead. You record it by using a reverse charge tax rate or code, so the software adds the VAT to box 1 and reclaims it in box 4.
Read articleAn invoice and a bill are the same document. The seller calls it an invoice because they issue it to get paid, and the buyer calls it a bill because they receive it and have to pay it.
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Use individual lines when charges need different ledger accounts, tax treatment or tracking, or when you need each product or service recorded separately. A single total suits one accounting treatment. A tax summary can preserve several tax rates without recreating every product line.
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You can review the document description, its tax breakdown and the descriptions and amounts of individual charges. These serve different purposes: context for the invoice, totals by tax treatment, and detail for line-by-line coding. Choose the export view that carries the information your books need.
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