There are many reasons where a credit note may be required to be created in Xero Practice Manager.
Some of these are 'accounting' credits which can be completed in Xero (blue):
- A credit for early payment
- A credit for a bad debt
In other instances we may not require a credit at all, we are better off cancelling and re-issuing the invoice at the correct value to the correct client in Xero Practice Manager:
- An incorrectly invoiced value
- An invoice created on the incorrect basis (fixed vs time/cost)
- An incorrectly invoiced client
Others still are credits for the value of our services and need to be recorded in the job they relate to in order to accurately reflect our client, job, team and service profitability:
- A partial credit for re-work we had to do
- A partial credit for an over-invoiced value
- A partial credit negotiated on the perceived value of work delivered
For these there is a particular process we must follow in order to accurately report the performance of this job, client, team and services.
- Un-do any WIP wash-up that has occurred by going to the job's financial tab and 'Un-do WIP wash-up'
- Create a progress invoice as at the credit note date on the actual time/cost basis
- Un-tick all items on the invoice
- 'Add Cost' and add in a -1 quantity, $0 cost and the value of the credit as a positive number in the 'price' field.
- Approve - this will send the credit note to Xero
- Re-apply the WIP wash-up if necessary by again clicking 'Remove from invoice list'
A common error is to first add a negative cost in the costs tab of the job and pulling this through to the invoice. The problem this creates is that as well as creating a negative invoiced value on the job (which we want) we're also getting a negative billable value on the job from what XPM thinks is a negative disbursement (which we don't want).
By removing all items from an actual time/cost invoice and 'add cost' we are adding what XPM calls an 'additional cost' which will correctly affect our job WIP balance without distorting the billable value of our teams efforts incurred to date on the job.