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Xero: Understanding Liabilities

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Xero is an online accounting system, that integrates with Timely to help you manage your financial transactions. When you connect Xero to your Timely account, we'll automatically make sure that your Timely invoices, and any associated payments, are synced across to your Xero account. So you only have to enter your sales information in one place! 


When using Xero, you will likely want to understand how to work with liabilities; such as gift vouchers, customer credits, or custom packages. In this guide you will learn more about understanding liabilities when using Xero. For more information on what liabilities are and how they differ from revenue, see our help guide Understanding liability vs revenue.

 

 

How to add a liability account in Xero

If you are wanting to use gift vouchers, customer credit or new packages with your Xero integration, you will need to set up liabilities in your Xero Chart of Accounts first. This will then allow you to complete the account mapping steps later on. There are different types of liability accounts that you may want to establish, these could include:
 

  • Gift vouchers
  • Customer credits
  • New packages
     

This way, when a voucher is purchased or a credit issued, the liability account total increases. Then, when a voucher or credit is redeemed (either fully or partially) the liability account total goes down and the revenue is recognised in your sales reports. If a voucher or new package expires (i.e. is not used) Timely will deduct the unused value from the liability account.

 

Steps for adding a liability account in Xero

1 To start, in Xero head to your Chart of Accounts.

 

2 Click Add account to set up a new account, and choose the Current Liability account type.

 

3 Set up a Code and Name for your new liabilities account.

 

4 When you are ready, click save to finish setting up your new liability account. Repeat the process for the any other liability accounts you need for your business.

 

Timely note: Xero has more information on account types (including Liabilities) here.

 

 

How to map to accounts in Xero

Once you've got your liability accounts set up in Xero, you can then map to these. To do this:
 

1 Head to setup from the main menu in your Timely account dashboard, and then to integrations (formerly add-ons).

 

2 Click configure next to the Xero integration, then the edit settings button.

 

3 Next, go to the account mappings tab, and choose a Xero account for each payment type.

 

Timely note: this is where you will select the account to map to. You could chose a liability account for gift vouchers, customer credits, or new/custom packages. Make sure you have followed the steps for adding liability accounts in order to do this!

 

4 When you are ready, click save to complete the process.

 

 

Understanding how payments sync across Timely and Xero

A payment will need to be received in Timely to activate customer credit, a gift voucher or a new/custom package. You will need to apply payments in Timely and let those sync to Xero. Payments can then be reconciled in Xero as normal, you can learn more about how to do this in our help guide How to reconcile your payments in Xero.

If you prefer to apply payments in Xero, you'll still need to apply the payment in Timely to activate the voucher. A payment can't be synced to Xero if a payment has already been applied to the synced invoice in Xero. 

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