Welcome to the Fit Small Business Xero training course! In this lesson, we’re going to cover how to set up suppliers in Xero.
You can follow along on your own Xero account. If you don’t have one already, click here to sign up for a free 30-day trial and follow along below.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!
Why Is It Important to Set up Supplier Contacts
If you’re converting from another accounting software to Xero, then you know the amount of time that can be saved by having access to your supplier contact details like email, telephone and address all in one place.
Beyond contact details, you can setup custom payment terms (i.e. Net 15) for those suppliers who you have negotiated special terms with. In addition, there is a great feature that will allow you to batch several bills into an electronic file and upload it for payment via online banking or other payment service; this is called the batch payment feature, which we will discuss in more detail later on.
In this lesson, we will focus on how to set up supplier contacts manually. However, if you have an existing list of suppliers that you would like to import into Xero then head over to our lesson on How to Import Customers and Suppliers into Xero. Once you have imported your supplier list, be sure to come back to this lesson to learn how to modify your supplier information.
How to Add a Supplier Contact
In Xero, anyone you pay money to is considered a “supplier” contact. Anyone who pays you money is considered a “customer” contact. When adding a new contact, the steps for adding suppliers and customers are almost identical, although each have different fields you’ll need to focus on. If you want to add a customer, we cover this here.
Once you have added a new contact, you will find it listed in the All Contacts group. Based on the type of transaction (i.e. invoice, bill, credit note), Xero will automatically group your contacts as customers, suppliers or both. For example, if you purchase products or services and sell products and services to the same company, they will be set up as both a supplier and a customer contact in Xero.
To add a supplier contact, follow the steps below.
Step 1 – Navigate to the Contacts menu and select Suppliers as indicated in the screenshot below.
Step 2 – Click the “Add Contact” button as indicated in the screenshot below.
Step 3 – Complete Supplier Information
The following screen is broken up between contact details and financial information. We will cover the contact details first. In the screenshot below, we have highlighted the key contact info fields to complete for your suppliers along with a brief description of what to include for each.
Supplier Contact Info – Enter primary contact, email, phone and mailing address for all suppliers.
- Contact Name – Enter your supplier’s name in this field. Be sure to enter the name as it should appear on the checks/payments that you make.
- Account Number – Enter your account number with the supplier, if applicable. This info will appear on check remittances but you will need to set it up. You can find more info on how to do this here.
- Primary person – Enter the name and email address of your primary contact. If you have more than one contact, you can click the Add another person link and enter their info as well.
- Phone/Fax/Mobile – Enter the phone, fax and cell phone numbers that you use to contact your supplier.
- Skype Name/Number – Enter the skype id of your supplier. This is an ideal way to communicate face to face with your supplier.
- Website – Enter the supplier’s website in this field.
- Postal Address – Enter your supplier’s remit to address in this field. This the address that will appear on any payments that you make via check to your supplier.
- Street Address – Enter the physical address of your supplier’s location in this field. This will come in handy if you need to pick up products as opposed to having them delivered to you.
Note: It’s important to set aside the time to ensure this information is accurate because it will be used for email templates, reports, any apps that you add-on from the marketplace and a variety of other tasks.
Step 4 – Complete Financial Details
As we mentioned previously, the setup screen for customers and suppliers is identical. In this lesson, we will only focus on the fields that relate to suppliers. In the How to Set Up Customers lesson, we discussed the fields related to setting up customers.
In the screenshot below, we have highlighted the fields to complete for your suppliers along with a brief description of each.
Note: Any information that you enter here will be default settings for your supplier. However, you can override them if needed when you enter and pay bills received from your suppliers.
- Purchase Settings – From the drop down menu, you can select one of the following tax options:
- Tax inclusive – This option will include tax for each taxable item on purchase orders and bills that you create for suppliers.
- Tax exclusive – Select this option to show tax separately on purchase orders and bills created for suppliers.
- No Tax – Select this option if you are not required to pay sales tax.
- Default account – In this field, you can assign a default account that will be used on all purchase transactions that you create for this supplier (i.e. purchase orders, bills, credit notes). I recommend that you leave this field blank unless the product or service that you purchase from this supplier is always the same.
- Default Tracking Category – Xero allows you to setup tracking categories that will allow you to see how different areas of your business are performing (i.e. departments, locations or regions). From the dropdown menu, you can assign a default tracking category for customer contacts; in the screenshot above region has been set up as a tracking category.
- Tax – From the dropdown, you can select one of the following options:
- EIN (Employer Identification Number) – Enter the employer ID number for your supplier. If you hire a contractor, be sure to ask them to supply you with a W9 Form. This form will include their business name (DBA), mailing address and their EIN or SSN. When entering the EIN, be sure to use the correct 9 digit format: XX-XXXXXXX.
- Note: It is important that you have the EIN or SSN on file for any supplier that you do business with that is not incorporated. At the end of the year, you will need this information to generate a 1099 form for anyone that you paid $600 or more to in the calendar year.
- SSN (Social Security Number) – Enter your supplier’s social security number if they don’t have an EIN. When entering the SSN, be sure to use the correct 9 digit format: XXX-XX-XXXX.
- ITIN (Individual Taxpayer ID Number) – This number is issued by the IRS to individuals who do not have (and are not eligible) to obtain a social security number. It is a nine digit number that always begins with with the number “9” and has a “7 “ or “8” in the fourth digit (i.e. 9XX-7X-XXXX).
- EIN (Employer Identification Number) – Enter the employer ID number for your supplier. If you hire a contractor, be sure to ask them to supply you with a W9 Form. This form will include their business name (DBA), mailing address and their EIN or SSN. When entering the EIN, be sure to use the correct 9 digit format: XX-XXXXXXX.
- Tax on Purchases – If the tax rate for purchases that you make from this supplier differ from the default tax rates, enter the tax rate for this supplier in this field. Otherwise, just leave it blank and the default tax rate will apply.
- Batch Payments – If you pay multiple bills (batch payments) to a supplier, you can enter their banking details in this field. This will allow you to create an electronic payment file that you can send through your online banking or other payment service. Be sure to enter the bank routing number and account number in this field along with the name of the bank and the bank account type.
- Bills Due Date – If the payment terms for this supplier differ from the default payment terms, enter the agreed-upon payment terms for this supplier in this field. This info will be used to alert you when a bill due date is coming up.
- Xero Network Key (Known as Xero to Xero) – If your supplier is also a Xero user, you can enter their unique Xero network key here. This will allow them to send you bills through Xero and allow you to submit payment in this manner as well. You will find step by step instructions on how to send a Xero Network invite here.
How to Edit a Supplier Contact
After you have added a supplier contact, you can make changes to the contact and financial information at anytime. Follow these steps to edit an existing supplier contact.
Step 1 – Navigate to All Contacts
From the contacts menu, select all contacts and the following screen will display. In this screen, you can see the contact details of the supplier in the first two columns. The last two columns will show your current accounts payable balance (you owe them) and your current account receivable balance (they owe you).
Step 2 – Select the Supplier to edit
From the supplier list, click on the supplier that you want to make changes to as indicated in the screenshot below.
Step 3 – Update Supplier Information
From this screen, you can easily view all of the contact and financial information all in one screen. Select the “Edit” button as indicated below, make the necessary changes and save your work.
Xero Edit Supplier – Make any modifications needed to an existing supplier.
How to Archive and Restore Supplier Contacts
Similar to customer contacts, once you set up a supplier contact, you cannot delete it. However, you can archive a supplier that you no longer do business with. When you archive a supplier, you will be able to view the contact details and any transactions that have been created; however you will not be able to create any new transactions.
If you decide to start purchasing from the supplier again, you can easily restore the supplier so that you can start creating new transactions again. Next, we will walk through the steps to archive a supplier and then I will show you how to restore it.
Archive Supplier Contact
Follow the steps below to archive a supplier contact.
Step 1 – Select the supplier to Archive
From the supplier list, put a checkmark in the box to the left of the supplier that you want to archive as indicated in the screenshot below.
Step 2 – Select Archive
Click on Options and then Archive as indicated in the screenshot below.
Xero Archive a Contact Feature
Step 3 – Confirm that you want to archive the supplier contact.
As indicated in the screenshot below, click on the “Archive” button to proceed or click cancel if you decide not to proceed.
Restore Supplier Contact
Follow the steps below to restore a supplier contact that was previously archived.
Step 1 – Navigate to Archived Group
From the contact list menu, you will see a group entitled Archived as indicated in the screenshot below. Click on that group to display all contacts that have been archived.
Step 2 – Select Supplier Contact to Restore
From the supplier list, select the supplier that you want to restore as indicated in the screenshot below.
Step 3 – Select Restore
Click the Restore button in the upper right hand corner as indicated in the screenshot below.
Step 4 – Confirm Restore
The following screen will appear. You can click restore to proceed or cancel if you have decided not to restore the supplier.
Wrap Up
That wraps up the section on how to set up suppliers. The next lesson in our Xero Training Course will be how to import customer and suppliers. In this lesson, we will walk you through how to import your existing customer and suppliers from another accounting software. To access this lesson or any of the others in the series, click here. For a free 30-day trial of Xero, click the button below.
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