Xero

Xero is a powerful online accounting software that has localizations for many countries. MRPeasy focuses on manufacturing resource planning, reporting, inventory management, sales, and procurement. MRPeasy together with Xero accounting creates a very powerful ERP system. We strongly recommend performing all business operations in MRPeasy, and in Xero the accounting only.

A quick summary of the integration:

  • It is possible to choose if only documents (Purchase Order / Purchase Invoice, Invoice, Credit-Invoice) are duplicated to Xero, or also all inventory and manufacturing transactions are posted to Xero with journal entries.
  • The integration can be configured to work fully automatically.
  • Sales, inventory transactions, manufacturing, and purchases should be managed in MRPeasy. Financial values, such as changes in inventory accounts, WIP, COGS, etc. are posted to Xero daily.

Jump to:

  1. How to connect with Xero?
  2. How does the integration work between MRPeasy and Xero?
  3. Selecting what to synchronize.
  4. Choosing how Purchase Orders / Purchase Invoices are synchronized.
  5. Selecting accounts for integration.
  6. How to import items, customers, and vendors from Xero?
  7. How is the first synchronization performed?
  8. When are synchronizations performed?
  9. Can I use Xero Tracked Inventory?
  10. How does inventory tracking work in MRPeasy?
  11. Can I use several inventory accounts?
  12. Can I use several sales accounts?
  13. Synchronization of tax.
  14. How are new items, customers, and vendors posted to Xero?
  15. How to work with Purchase Orders (POs) and Invoices?
  16. How to reconcile direct labor, overheads, and transfer expense liabilities?
  17. Troubleshooting, synchronization logs.

Setup of the integration between MRPeasy and Xero

Step 1. Connect MRPeasy and Xero

  1. Log in to MRPeasy.
  2. Navigate to Settings -> System settings -> Integrations.
  3. Click on Connect to Xero to connect MRPeasy and Xero.

Step 2. Choose what to synchronize

It is possible to choose the synchronization of the following:

  1. Sales - If selected, Invoices and Credit-Invoices are sent to Xero automatically, according to the synchronization schedule. If not selected, these can be sent manually only.
  2. Procurement - If selected, Purchase Orders / Purchase Invoices are sent to Xero automatically, according to the synchronization schedule. If not selected, POs can be sent manually only.
  3. Balances - If selected, the financial transactions that are recorded in MRPeasy regarding inventory management, manufacturing, procurement, and sales, are posted to Xero with journal entries, according to the synchronization schedule. If not selected, the posting of balances with journals is completely disabled.

Step 3. Choose how Purchase Orders are sent to Xero

Purchase Orders from MRPeasy can be posted to Xero as:

  1. Purchase Orders in Xero, or
  2. Bills in Xero.

Important! 

  • Payments for purchases are synchronized only if purchase orders are posted to Xero as bills.
  • If Several invoices per PO is enabled, then POs are not posted to Xero. Purchase Invoices are posted as Bills.

Step 4. Select accounts for the integration with Xero

If synchronization of "Balances" is not selected in step 2, two accounts must be chosen:

  1. Purchases (Current Asset).
    - The default account used for items on Purchase Orders / Purchase Invoices that are duplicated to Xero.
    - If "Balances" are not synchronized, this could be an inventory account, an expense account, etc. It could be freely changed in documents in Xero.
    - If "Balances are synchronized", this is an account for holding costs of items or services not yet received, but the invoice from the vendor has been received or paid. It must not be manually changed in any documents in Xero.
  2. Sales (Revenue).
    - The default sales account used for items on Invoices and Credit Invoices that are duplicated to Xero.
    - An account where sales revenue is posted. It could be freely changed in documents in Xero.

If synchronization of "Balances" is chosen in step 2, the following accounts or similar must be chosen additionally:

  1. Bank account (Current Asset).
    - An account to where payments, if entered in MRPeasy, are posted to.
  2. One Inventory (Current asset) account only; or separate Finished goods (Current asset) and Materials on hand (Current asset) accounts.
    - Accounts for tracking the value of inventory.
    - A current asset account to record stock on hand is necessary. Do NOT choose an account type of 'INVENTORY' - this is a special system account type for Xero Tracked Inventory functionality, which cannot be used.
    - All items with a BOM are considered finished goods; items without a BOM are considered materials.
  3. Work in progress (Current asset).
    - An account for holding the value of currently unfinished goods, open manufacturing orders. A cost of a product = consumed materials + performed direct labor + allocated manufacturing overheads.
  4. Direct labor (Current liability).
    - An account for posting direct labor costs, which are applied to product cost (to work in progress) according to time worked on a job. This should be a current liability, wages earned by employees, and should be reconciled with payroll regularly.
    - If the allocation of direct labor is not desired, then users’ hourly labor rates must be defined as 0 in MRPeasy.
  5. Manufacturing overheads (Current liability).
    - An account for posting allocated manufacturing overhead costs, which are applied to product cost (to work in progress). This should be a current liability, overhead expenses pre-applied to product costs, and should be reconciled with actual expenses regularly.
    - If the allocation of manufacturing overhead is not desired, then workstations’ hourly rates and fixed and variable costs in Routings must be defined as 0 in MRPeasy.
  6. Transfer orders liability (Current liability).
    - If you have several sites between which you move items, then transfer fees, which are applied to inventory costs, are posted on this account. This should be a liability, transfer expenses pre-applied to inventory, and should be reconciled regularly with actual expenses.
  7. Cost of goods sold (Expense).
    - An account where the cost of goods sold is posted, once the items are shipped to the customer.
  8. A single Inventory Adjustments account; or separate Inventory gain (Revenue) and Inventory loss (Expense) accounts.
    - Accounts for posting inventory balance changes from manual adjustments of inventory levels.

Step 5. Importing stock items, customers, and vendors from Xero

It is possible to import stock items, customers, and vendors from Xero to MRPeasy at MRPeasy -> Settings -> System settings -> Integrations -> Xero, by using the respective buttons.

This will import new objects only. If some objects were imported before, these will be skipped and not imported twice.

Stock items are matched by Item Code in Xero and Part Number in MRPeasy.

Step 6. First synchronization

When making the connection between MRPeasy and Xero:

  1. The changes in account balances from that day are posted to Xero during the next nightly synchronization.
  2. The previous POs and Invoices are posted only after you open them and save. If you do not make changes to old documents, they are not posted to Xero.

Step 7. Configuring user access rights in Xero

It is recommended to enable Advisor access for the account manager because otherwise, it is not possible to see manual journal entries that MRPeasy posts to Xero.

How the integration works between MRPeasy and Xero

Generally, it is possible to configure if only documents (Purchase Order/Invoice, Invoice, Credit-invoice) are duplicated to Xero, or also all inventory and manufacturing transactions that are tracked in MRPeasy are posted to Xero with journal entries.

  1. Events in direction MRPeasy -> Xero.
  2. Events in direction Xero -> MRPeasy.
  3. Synchronization schedule.

Events in MRPeasy and the resulting events in Xero:

# MRPeasy document MRPeasy event Xero event Xero Debit account Xero Credit account
Purchasing
1 Purchase Order Purchase Order is created. No event.    
1.1 Purchase Order / Purchase Invoice The 'Invoice ID' is saved. PO or Bill is created*. 'Purchases' Xero controlled (eg, Accounts Payable)
1.2 Purchase Order / Purchase Invoice PO is updated. PO or Bill is updated*, if Xero accepts the update. Approved documents cannot be updated by MRPeasy. According to 1.1
1.3 Purchase Order / Purchase Invoice PO is received. Journal is made***.
(Exceptions: 2.2, 3.1)
'Materials on Hand' 'Purchases'
1.4 Purchase Order / Purchase Invoice  Payment is saved. Payment is saved for Bill**. (Payment is created according to the difference in the sum of saved payments in MRPeasy and Xero.) Xero controlled (eg, Accounts Payable) 'Bank'
1.5 Purchase Order / Purchase Invoice  Payment is deleted. No event, payment must be deleted manually.    
1.6 Purchase Order / Purchase Invoice PO is deleted. 1. If PO had additional transactions associated, a new journal is made with net adjustments***. According to 1.3, 2.2, 3.1
      2. PO/Bill is not deleted, it must be deleted manually.    
Purchasing - additional transactions of Subcontracting Purchase Orders
2 Shipment (for a Purchase Order.) Shipment is created for shipping parts to vendor No event.    
2.1 Shipment  Goods are picked from stock. Journal is made***. 'Work in Progress' 'Materials on Hand'
2.2 Purchase Order PO is received. Journal is made***. (This is an exception to 1.3) 'Finished Goods' 'Work in Progress'
'Purchases'
3 Purchase Order (for an operation in a MO.) "Shipment date" is saved. Journal is made***. 'Work in Progress' 'Purchases'
3.1 Purchase Order PO is received. No event. (This is an exception to 1.3)    
Manufacturing
4 Manufacturing Order Manufacturing Order is created No event.    
4.1 Manufacturing Order Parts are consumed. Journal is made***. 'Work in Progress' 'Materials on Hand'
 
4.2 Manufacturing Order Operations are started. 1. Journal is made with full planned overhead cost***. 'Work in Progress' 'Manufacturing Overheads'
  2. Journal is made with full planned labour cost***. 'Work in Progress' 'Payroll/Direct labour'
4.3 Manufacturing Order Manufacturing Order is finished. 1. Journal is made***. 'Finished Goods' 'Work in Progress'
      2. Journal is made to adjust overhead and labour cost***. According to 4.1, 4.2.
Sales
5 Customer Order Customer Order is created No event.    
6.1 Invoice Invoice status is changed from 'Dummy' to 'Unpaid'. Invoice is created*. Xero controlled (eg, Accounts Receivable) 'Sales'
6.2 Invoice Invoice is updated. Invoice is updated*, if Xero accepts the update. Approved documents cannot be updated by MRPeasy. According to 6.1
6.3 Invoice Payment is saved. Payment is saved for Invoice**. (Payment is created according to the difference in the sum of saved payments in MRPeasy and Xero.) 'Bank' Xero controlled (eg, Accounts Receivable)
6.4 Invoice Payment is deleted. No event, payment must be deleted manually.    
6.5 Invoice Invoice is deleted. No event, invoice must be deleted manually.    
7.1 Credit-invoice Credit-invoice status is changed from 'Dummy' to 'Unpaid'. Credit-invoice is created*. Xero controlled (eg, Accounts Payable) 'Sales'
7.2 Credit-invoice Credit-invoice is updated. Credit-invoice is updated*, if Xero accepts the update. Approved documents cannot be updated by MRPeasy. According to 7.1
7.3 Credit-invoice Payment is saved. Payment is saved for Credit-invoice** (Payment is created according to the difference in the sum of saved payments in MRPeasy and Xero.) 'Bank' Xero controlled (eg, Accounts Receivable)
7.4 Credit-invoice Payment is deleted. No event, payment must be deleted manually.    
7.5 Credit-invoice Credit-invoice is deleted. No event, credit-invoice must be deleted manually.    
8 Shipment (for a Customer Order.) Shipment is created No event.    
8.1 Shipment Goods are picked from stock. Journal is made***. 'Cost of Goods Sold' 'Finished Goods'
Other inventory transactions
9 Manual stock lot A manual stock lot is created in MRPeasy during the stock-taking. Journal is made***. 'Materials on Hand' / 'Finished Goods' 'Inventory gain'
10 Write-off A manual write-off is created in MRPeasy during the stock-taking. Journal is made***. 'Inventory loss' 'Materials on Hand' / 'Finished Goods'
11 Transfer Order Transport fees are applied to a Transfer Order, and Transfer Order is received. Journal is made***. 'Materials on Hand' / 'Finished Goods' 'Transfer orders liability'
Other transactions
12 Purchase Order, Purchase Invoice, Manufacturing Order, Manual stock lot, Write-off, Transfer Order, Shipment Document is changed and inventory cost or balances change. Journal is made with net adjustment***. According to the transactions, which are updated.

 

Events in Xero and the resulting events in MRPeasy:

# Xero document Xero event MRPeasy event
Payments
1 Bill, Invoice, Credit-Invoice Payment is saved. Payment is saved for Purchase Order / Purchase Invoice.**
(Payment is created according to the difference in the sum of saved payments in MRPeasy and Xero.)
2 Bill, Invoice, Credit-Invoice Payment is deleted. No event, payment must be deleted manually.

 

Synchronization schedule:

  • *) Invoices and purchase orders are sent to Xero once per 5 minutes. Alternatively, it is possible to send a particular document to Xero immediately by clicking the button Add to Xero at the document's details page.
  • **) Payments are synchronized along with invoices and purchase orders and during nightly synchronizations.
    NB! Payments for purchases are synchronized only if purchase orders are posted to Xero as bills.
  • ***) Actions, that are made once per day, are performed during the evening (usually between 9 p.m. and 1 p.m.). These can be run manually by clicking button Synchronize at Settings -> System settings -> Integration -> Xero. Synchronization can be performed no more often than once per 5 minutes.

Xero Tracked Inventory

Inventory (stock) tracking should not be used in Xero for items that are managed in MRPeasy. Xero makes some automatic inventory transactions for these items, e.g. when they are bought or sold, which MRPeasy does not control.

MRPeasy itself posts changes in inventory balances to accounts during nightly synchronizations.

Technical reasons why MRPeasy does not integrate with Xero Tracked Inventory are the following:

  1. At present Xero does not support the importing of inventory values for items via API.
  2. Xero advises not to use its' inventory tracking for manufacturing companies (https://central.xero.com/s/article/Track-your-inventory), or when using a 3rd party inventory application (https://central.xero.com/s/article/Options-for-managing-inventory-in-Xero)

Inventory tracking in MRPeasy

In MRPeasy, the principles of inventory tracking are the following:

  1. All items in inventory are tracked using stock lot tracking within MRPeasy. I.e. each batch of physical items is accounted for separately.

    A stock lot is an internal business object in the MRPeasy software, used for providing the FIFO method of using goods, and also for specific functionality, like expiry date, or batch traceability. Without such specifics, you do not need to operate with stock lots in your daily business (MRPeasy does it in the background).

  2. By default, MRPeasy uses FIFO (FEFO, when Expiry dates are used) principle when booking goods for consuming or shipping goods from inventory.

    It is possible to manually manage and override the bookings and consumption of inventory, e.g. for actual costing and/or for very detailed tracking and traceability.

  3. Financial transactions are automatically made when specific events happen with the inventory.

Coding items to different Inventory accounts

For inventory items, it’s possible to use a single Inventory account, or separately one Materials on hand account and one Finished goods account.

When an MRPeasy Purchase Order is synchronized to Xero, then:

  • On the Xero Bill, the asset account must not be changed. The integration default account must be used.
  • On the Xero PO, the asset account must not be changed. The integration default account must be used.

Otherwise, e.g., when materials are consumed in manufacturing, or items directly sold, MRPeasy will post a manual journal, which will credit the original asset account, but not the account that was changed on the Bill/PO.

Coding items to different Sales accounts

Different sales accounts for items can be assigned in Xero, after the invoice is posted from MRPeasy to Xero.

Tax rates

The synchronization of tax rates works as follows:

  1. MRPeasy operates with tax percentages only, there are no 'named' tax rates.
  2. When a document with tax is sent to Xero, the tax rate in Xero with the same percentage is automatically chosen. If there are several tax rates with the same percentage, then the correct tax rate must be chosen in Xero.
  3. If you need a 'No tax' invoice, please leave the tax percentage field empty in MRPeasy.
  4. If you need a 0% tax, please enter tax as '0%' in MRPeasy.
  5. Unfortunately, MRPeasy cannot post 'Tax included' invoices. If this is important, please update these invoices in Xero.

Working with Purchase Orders and Invoices

Posting new items, customers, and vendors to Xero

  • When posting invoices and purchase orders to Xero, MRPeasy will create stock items, customers, and vendors in Xero, if they do not exist.
  • Stock items are matched by Item Code in Xero and Part Number in MRPeasy.
  • If a part number is longer than 30 characters, then the item is not transferred to Xero as a product. The part number is combined with the description into the description field.

Synchronizing Purchase Orders or Bills with Xero

During integration setup you must choose if Purchase Orders in MRPeasy are posted to Xero as Bills or Purchase orders.

Once the Invoice ID has been entered on Purchase Orders or Purchase Invoices in MRPeasy, then it will be synchronized to Xero.

After a Bill / Purchase order has been approved in Xero, it is not possible to update it via the integration from MRPeasy any longer.

Posting additional fees on an MRPeasy Purchase Order to Xero

If the Additional fees field is used on a Purchase Order in MRPeasy, then this is posted as a line item to Xero.

This must be posted to the integration default account (Purchases). The additional fees are expenses which are added to inventory valuation. This will be expensed when finished goods are sold and included in COGS.

If additional fees are expensed immediately, and not part of inventory valuation, then for these, non-inventory items in MRPeasy can be used. In the Xero Bill, or product configuration page, if necessary, the desired expense account can be selected for the item.

Synchronizing Invoices to Xero

Once invoice type is marked Invoice or Credit invoice, and status is not Dummy, they are synced to Xero as drafts. They must be approved in Xero.

The invoices must have a due date saved in MRPeasy.

After an Invoice has been approved in Xero, it is not possible to update it via the integration from MRPeasy any longer.

Reconciling accounts

How to reconcile a Direct labor account?

Direct labor cost is part of the cost of goods sold (Expense), and it is pre-applied to products before a pay run is made. This allows to estimate the real cost of products, but this also means that the pre-applied portion of labor costs must be reconciled with actual labor costs.

Generic example, periodic reconciliation of posted direct labor:

  1. A pay run is made.
    For example, resulting account transactions might be the following:
    D Wages and Salaries (Expense)
    C Payroll (Current liability)
    D Payroll (Current liability)
    C Bank (Current assets)

  2. A manual journal entry is made to zero out direct labor liability for that period:
    D Direct labor account (Current liability)
    C Wages expense (Expense) / or COGS / or similar

Always consult your local accounting specialists, to make sure you follow local laws and regulations.

How to reconcile the Applied Manufacturing Overheads account?

Applied manufacturing overhead cost is part of the cost of goods sold (Expense), and it is pre-applied to products before bills have actually been received. This allows to estimate the real cost of products, but this also means that the pre-applied portion of overheads must be reconciled with actual expenses.

Generic example, periodic reconciliation of posted applied manufacturing overhead:

  1. Bills are entered on expense accounts as normal.
    For example, resulting account transactions might be the following:
    D Expense account(s), e.g. COGS
    C Accounts payable (Current liability)
    D Accounts payable (Current liability)
    C Bank (Current assets)

  2. At the end of the accounting period, a manual journal entry is made to zero the applied manufacturing overhead account for that period:
    D Applied manufacturing overhead account (Current liability)
    C Expenses account(s) / or COGS / or similar.

Always consult your local accounting specialists, to make sure you follow local laws and regulations.

How to reconcile the Transfer Orders Liability account?

Transfer orders cost is part of the cost of goods sold (Expense), and it is pre-applied to products before bills have actually been received. This allows to estimate the real cost of products, but this also means that the pre-applied portion of overheads must be reconciled with actual expenses.

Always consult your local accounting specialists, to make sure you follow local laws and regulations.

Generic example, periodic reconciliation of posted transfer orders liability:

  1. Transportation expenses are entered as normal.
    For example, resulting account transactions might be the following:
    D Transportation (Expenses)
    C Accounts payable (Current liability)
    D Accounts payable (Current liability)
    C Bank (Current assets)

  2. At the end of the accounting period, a manual journal entry is made to zero the Transfer Orders Liability account for that period:
    D Transfer Orders Liability (Current liability)
    C Expenses account(s) / or COGS / or similar.

Always consult your local accounting specialists, to make sure you follow local laws and regulations.

Troubleshooting

To see what manual journal entries have been posted to Xero, please go to Settings -> System settings -> Integrations -> Synchronization logs.

Issues:

  • An invoice is not posted to Xero: 
    - MRPeasy only posts invoices in statuses 'Unpaid', 'Paid partially' or 'Paid'; and types 'Invoice' or 'Credit invoice'. Invoices in other statuses or types are not posted. Please check the status and type of the invoice.
    - Invoices are posted once per 5 minutes. To synchronize immediately, click Add to Xero in the Invoice details page.
  • An invoice cannot be updated. Error message "Invoice not of valid status for modification"
    - If an invoice is updated in MRPeasy after it is approved or paid in Xero, we cannot update it automatically, because Xero does not allow editing these invoices via API. This can only be done in Xero.
  • A Purchase Order is not posted to Xero: 
    - The "Invoice ID" must be saved in the Purchase Order details in MRPeasy, before it will be posted. Please check that this is done and the PO is saved. 
    - Purchase Orders are posted once per 5 minutes. To synchronize immediately, click Add to Xero in the Purchase Order details page.
  • A Purchase Order cannot be updated. Error message: "Invoice not of valid status for modification"
    - After a Bill / Purchase order has been approved in Xero, it is not possible to update it via the integration from MRPeasy any longer.
    - Please update it in Xero.
  • Error message: "Account code or ID must be specified" or "The TaxType field is mandatory"
    - Please go to Xero -> Products and services, and check that every product in the document has both purchases and sales accounts set.
  • Error message: "Organisation is not subscribed to currency ..."
    - This means that Xero does not recognize this currency.
    - Please check that currency symbols in MRPeasy correspond to international standard codes. E.g. the US dollar should be USD, not US$, the Australian dollar should be AUD, not AU$. See: https://en.wikipedia.org/wiki/ISO_4217
    - Please check that the currency is set up for use in your Xero account.
  • Customers are not imported from Xero.
    - The company with this name or account number exists in MRPeasy. It can be hidden if it is deleted. In this case, please go to CRM -> Customers, and find the company by number. This will show both active and deleted companies.
    If you do not remember the number, please use some general parts (as "C" or "0") to find the customers. If the customer exists but is deleted, please open it and click the Restore button.

Old version 

Above mentioned functionality is available in the new version of the integration, from August 24-th, 2017. If you have used the integration before that day, this functionality is not available. To enable it, go to MRPeasy -> Settings -> System settings -> Integration -> Xero, disconnect from Xero, and connect again.

Support

The integration between Xero and MRPeasy is maintained by MRPeasy. If you have technical questions about the integration, please turn to MRPeasy support. However, our Support team is unable to consult you regarding the setup of your accounting in Xero.

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