This guide covers:
What happens in Xero when you collect a payment without an invoice
Advanced options for syncing payments to Xero, and which one to choose
How VAT is applied
What happens in Xero when you collect a payment without an invoice
If you collect a payment in Adfin using a payment line, payment schedule, or the payment portal, and you have Xero connected, the payment can be synced to Xero.
Default behaviour
The payment is synced to Xero as a Receive Money bank transaction
The transaction is created in the Adfin clearing account
It is linked to the relevant customer
The payment is coded to your Sales (200) revenue account in Xero
A Receive Money transaction records the payment as income straight away. It isn't held as a credit against the customer, so it can't be applied to an invoice afterwards. If you'd rather match payments to invoices you raise in Xero later, choose the Overpayment or Prepayment option instead. There's more on how to pick the right one below.
Advanced options for syncing payments to Xero
You can customise how payments are synced using the advanced settings in your Xero configuration.
Turn off payment syncing
You can disable payment syncing entirely. If you do this, Adfin will not create any payment or transaction in Xero when a customer pays.
Change the payment type
Instead of a Receive Money transaction, you can choose to sync payments as:
Overpayments
Created as an Overpayment in Xero
Treated as a liability
Easy to allocate against a customer when you raise an invoice
VAT cannot be included
Prepayments
Created as a Prepayment in Xero
Also treated as a liability
Easy to allocate when raising an invoice
VAT can be specified
Which option should you choose?
Choose Receive Money if you just want the payment recorded as income and won't be raising an invoice for it in Xero. It can't be matched to an invoice later.
Choose Overpayment if you'll raise an invoice in Xero later and want to apply the payment to it, with no VAT due at the point of payment.
Choose Prepayment if you'll apply it to an invoice later and VAT is due now, for example a deposit or advance payment.
Choose a different account
You can also choose which Xero account the payment is coded to.
The list of available accounts will depend on the payment type you select.
How VAT is applied
If you sync payments as a Receive Money transaction or Prepayment, you can choose:
Whether VAT should be applied
Which VAT rate to use
Overpayments are always synced with no VAT. The VAT is picked up on the invoice you later apply the overpayment to.
How the VAT is calculated
When VAT is applied, the rate you choose is added on top of the payment amount. Adfin treats the payment as the amount before VAT, so the VAT is added to it rather than taken out of it.
Example
If a customer pays £22 and you've set a 20% VAT rate, the transaction in Xero is recorded as:
£22 net
£4.40 VAT
£26.40 total
Important notes about VAT
The VAT setting applies to all payments synced to Xero, not to individual payments
Because the payment amount is treated as VAT-exclusive, the total recorded in Xero is higher than the amount your customer paid. If you need the amount collected to be treated as VAT-inclusive, that isn't supported today
My payments are sitting in the clearing account and aren't allocated in Xero
This is expected, nothing has gone wrong. A payment with no matching invoice posts to your Adfin clearing account in Xero once it settles. It's recorded against the customer, but it isn't allocated to an invoice, because there's no invoice to allocate it to.
What happens next depends on your sync settings. If the payment synced as an overpayment or prepayment, it sits as a credit against the customer, and Xero will offer to apply it when you next raise an invoice for them. If it synced as a Receive Money transaction, the income is already recorded against your revenue account, so there's nothing to allocate and no invoice link to make. One thing to note: allocations you make in Xero stay in Xero, they don't sync back to Adfin.