How to allocate service expenses

Step 1

Under the Inventory tab, there are three new sections:

Service Expenses is where you set up new types of service expenses to select from later (e.g. import duties and clearance charges).

New Service Order is where you add a service expense that has been invoiced to you and needs to be allocated to purchase order/s.

Service Orders is where you actually allocate the expenses to the purchase orders and the items within them.

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Step 2

Let's begin by going to Service Expenses.

In here, click on the Service Groups tab to set up groups of service expenses.

Select New Service Group.

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Step 3

Name your service group and give it a code.

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Step 4

Now go to the Service Expenses tab to create a service expense.

Click on New Service Expenses.

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Step 5

Name your service expense and select which service group it falls under. Let's create the expense Storage under the group Freight.

Then enter the currency and cost. This might be a fixed cost or a daily or hourly rate.

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Step 6

Before we move on to creating service orders, make sure that you have set up the service provider as a supplier in your account.

E.g. For freight related expenses, set up your freight company as a supplier.

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Step 7

When a service provider (e.g. the freight company) invoices you, go to New Service Order to add the service expense.

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Step 8

Select the service supplier from the dropdown list. Let's choose our freight company.

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Step 9

Under item, add the service expense/s that this supplier has invoiced to you.

Under quantity, type in "1" if it is a fixed expense. For a variable expense, type the number of days or hours the expense has been charged for.

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Step 10

When you're done, hit save as receipted and the transaction will be sent through to your Xero freight expense account. You can no longer edit this service order once it is sent to Xero. If you still have edits to make, select save to draft instead.

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Step 11

Now go to Service Orders to view your service order and allocate service expenses to purchase orders.

They are grouped by service supplier. When you click on a supplier, all service orders for them appear on the right.

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Step 12

Click on the blue icon at the end of the row to allocate expenses for that service order.

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Step 13

Each service expense in the service order appears as an item in here.

First choose whether to "expense" this item. Expensing is often used for purchase orders of items that are consumed internally rather than those sold as stock.

E.g. If freight insurance only relates to a purchase order of internal office stationery, you would select "expense." This expense will not be allocated to individual items below.

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Step 14

Next, add the purchase order/s that these service expenses need to be allocated to.

Click New Purchase Order, then search for the order you want to add. A full list of purchase orders will pop up for you to choose from.

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Step 15

As you add purchase orders, the service expenses will be allocated to them based on their total value.

To manually allocate service expenses with custom amounts, deselect the checkbox next to Proportionate by Value.

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Step 16

Once saved, you'll see that the list icons have turned green. This means that you can now allocate service expenses to specific items within each purchase order.

Click on one of these green icons.

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Step 17

Here you can see each line item in the purchase order. By default, the service expenses have been allocated in proportion to each item's total value.

To manually allocate service expenses to each item with custom amounts, click Manual.

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Step 18

Once you save, the status of this purchase order will turn green, meaning that it is complete.

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Step 19

After you've finished allocating expenses for all purchase orders, the Save & Complete button will appear. Click this to finish the service expense allocation process.

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Step 20

In your service orders list, this order's status is now Allocated, meaning that all items within all purchase orders in this service order have been allocated.

This updates each item's unit cost which can be seen their material item history. This is also reflected in their stock on hand value in Xero.