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Configuring your Xero Integration - Perpetual Method

Last updated 18/03/2021

How to configure your Xero integration to match your accounting setup for the perpetual method.

Overview


This article is written for those that will use the Perpetual method of inventory accounting. For information about this, or if you are unsure of which method you use, please see the Perpetual Method and Periodic Method Help article for additional information.

Cin7 Accounting Specialists

If you have any questions about how best to set up your account, our Accounting Specialists will be happy to configure Cin7 for you. Just contact your Cin7 Onboarding specialist or Cin7 Support.

Before starting the configuration process, you first need to do the following:

  • Decided which inventory accounting method to use - Perpetual or Periodic.
  • Set up your General Ledger Accounts correctly.
  • Set up all the tax rates in Xero that you are likely to use.
  • Discussed all of the above with your accountant.

Once the above has been confirmed, navigate to the settings page to configure Xero:

  1. Log into Cin7 as an Administrator.
  2. From the left navigation, select Accounting, then Xero.
  3. From the top right, select the Settings gear icon.
  4. Choose Perpetual from Inventory method option
  5. Scroll down to Default Accounts.
  6. Select Finish.

Deciding how the Integration Operates


The first step is to decide how your integration operates.

Bank Account Details

Bank Account Currency

The home/base currency in Cin7 must match the home currency in Xero. Check your home currency appears, and is the same as in Xero.

Is Multi-Currency

If you buy/sell in multiple currencies, you will need to select Yes. You must have the correct Xero pricing plan to add multi-currency.

For more information see Multi-Currency with Cin7 and Xero.

Is mainly B2B?

If a majority of your sales are to other businesses, choose Yes.

Update Freight, Discount and Surcharge Tax Codes

Merge Sales Order Product Lines into One Line

If you are likely to have a high volume of transactions pushing to Xero each month, you may wish to combine your line items into one to keep within Xero's data limits.

To enable this, choose Yes.

You can change this setting at a later date.

Update COGS for Number of Past Months

How many months would you like to keep COGS calculations open in Cin7 for reimport should the value change? For new accounts, choose the default setting of 1 month.

Setting up Default Accounts


Default accounts are the general ledger (GL) accounts in Xero that Cin7 transactions are sent to, unless otherwise specified by an "alternative GL account".

For the Perpetual method you will need:

  • A revenue account for Sales.
  • An inventory account that is not the default Xero inventory account (620).
  • An expense account for non-stock purchases.
  • An expense account for stock loss, shrinkage, or write-offs.

If there is more than one relevant account you could use, it makes sense to make the default account the account to which a majority of transactions are sent.

List Ledger Accounts

In the form in this section you decide how Cin7 should code transactions. You should read the descriptions below, then enter the relevant account numbers into the blank fields.

Account Name Account Code Account Type Appears in Xero Used for
Stock On Hand Xero Account Number Current Asset Balance Sheet This is the inventory/SOH account that Cin7 will credit or debit. All Purchase Orders will be sent to this account. This must not be the default Xero inventory account*.
Sales Xero Account Number Revenue P&L The primary Sales account that is used in Xero.
Surcharge Xero Account Number Revenue P&L If you wish to split surcharges - such as credit card fees - into a separate account. This is commonly the same as your Sales account above.
FreightSales Xero Account Number Revenue P&L If you wish to split freight sales (not freight costs) into a separate account. This is commonly just the same as your Sales account above.
COGS Xero Account Number Direct Costs P&L This is the account to which all Cost of Goods Sold should be sent.
PurchaseDirectCost Xero Account Number Expense P&L This is the account to which the cost of all 'non stock' items are sent when purchased.
Adjustments Xero Account Number Overhead P&L An expense account dedicated to stock loss/shrinkage/write offs. If you have a simple COA it could just be "General Expenses".

*Xero's default inventory account cannot be updated by external applications. Therefore you must set up an additional inventory account, with the account type "Asset".

Setting up Alternative GL Accounts


You may not want all your transactions to go to the same default account each time. For accounting reasons it may be desirable to have, for example, wholesale transactions go to a wholesale GL Account, and retail sales go to your default GL account.

As stated above, it makes sense to set your default account as the account to which a majority of your transactions should go. Use the Alternative GL Accounts for exceptions to the default.

Keeping it Simple

When considering how to set up your alternative accounts, remember that Cin7 has comprehensive management reports that can be used to make business decisions such as the performance of a particular branch, brand or customer group. You will use Xero primarily for Financial Reporting.

It is recommended to keep your accounting setup as simple as necessary for Financial Reporting, then use Cin7 to produce Management Reports.

See the Setting up Alternative GL Accounts Help article for additional information.

Setting up Tax Rates


To create Tax Rates in Cin7, simply download your Tax Rates from Xero. To do this:

  1. From the left navigation select Accounting, then select Xero.
  2. Select Get Tax Rates and Accounts tab.
  3. Select Download Tax Rates.

Although it is possible to manually create or update Tax Rates in Cin7, it is recommended to create these Tax Rates first in Xero in order to ensure they are set up correctly and then re-downloading them from Xero.