Sales orders with Xero accounting

How to Create a Sales Order in Xero: Comprehensive Guide

Managing your sales orders effectively is an essential part of running a successful business. While Xero, a leading cloud-based accounting software, does not offer a dedicated "sales order" feature, there are practical ways to handle sales orders using Xero's existing tools. This blog post will explore three primary approaches to managing sales orders in Xero: using quotes, draft invoices, and integrating with third-party apps. By the end, you’ll have a clear understanding of how to adapt Xero to fit your sales order needs.

Understanding Sales Orders and Xero

A sales order is a document that confirms the details of a sale before it is invoiced or shipped. It typically includes information such as product descriptions, quantities, prices, and delivery terms. Businesses use sales orders to streamline their sales process, track inventory, and communicate clearly with customers.

While Xero excels in invoicing, expense tracking, and reporting, it doesn’t have a dedicated sales order module. However, with a bit of creativity, you can still manage sales orders effectively within Xero. Let’s dive into the three most common workarounds.

Option 1: Using Quotes as Sales Orders

Xero’s quote feature is a flexible tool that can act as a sales order system. Here’s how to use quotes to manage sales orders:

Step-by-Step Guide:

1. Log in to Xero: Start by logging into your Xero account.
2. Navigate to Quotes: From the main menu, go to Business > Quotes.
3. Create a New Quote: Click on the New Quote button.
4. Enter Customer Details: Add the customer’s name, address, and contact information.
5. Add Line Items: Include the products or services, quantities, and prices.
6. Review and Save: Check all details and click Save.

Benefits:

• Visibility: Quotes allow you to track the status of potential and confirmed sales.
• Flexibility: You can customise quotes to include terms and conditions, payment details, or delivery instructions.
• Conversion: Once the sales order is confirmed, you can easily convert the quote into an invoice. To do this:
  1. Open the saved quote.
  2. Click Options > Create Invoice.
  3. Review and finalize the invoice.

Limitations:

• Quotes don’t update inventory in Xero directly.
• The feature is not suitable for businesses requiring detailed sales order tracking.

Option 2: Using Draft Invoices as Sales Orders

Another simple way to manage sales orders is by creating draft invoices in Xero. Draft invoices can serve as placeholders for sales orders until they are finalised.

Step-by-Step Guide:

1. Log in to Xero: Access your Xero dashboard.
2. Navigate to Invoices: Go to Business > Invoices.
3. Create a New Invoice: Click the New Invoice button.
4. Add Customer and Order Details: Enter the customer’s information and order specifics, such as items, quantities, and prices.
5. Save as Draft: Instead of approving the invoice, save it as a draft by clicking Save as Draft.

Benefits:

• Ease of Use: The invoicing feature is intuitive and familiar to most users.
• Integration with Reporting: Draft invoices can be included in Xero’s reports for tracking sales projections.
• Customisation: You can include additional fields such as expected delivery dates or notes.

Limitations:

• Draft invoices may clutter your invoicing dashboard if not managed properly.
• They don’t differentiate between confirmed sales and tentative orders.

Tips for Success:

• Use consistent naming conventions or tags (e.g., “SO-2025” for sales orders) to differentiate draft invoices from finalized ones.
• Regularly review and clean up draft invoices to avoid confusion.

Option 3: Integrating with Third-Party Apps

If your business needs more robust sales order management, integrating Xero with third-party applications is the way to go. Several apps are designed to handle sales orders and sync seamlessly with Xero.

Popular Third-Party Apps:

1. Unleashed: A powerful inventory management system that includes sales order tracking.
2. Dear Systems: Comprehensive software for managing sales, inventory, and purchases.
3. TradeGecko (now QuickBooks Commerce): Ideal for businesses needing advanced order and inventory management.

How to Integrate:

1. Choose an App: Select the app that best fits your business needs. Most apps offer free trials.
2. Connect to Xero: Follow the app’s setup instructions to integrate it with Xero. Typically, this involves authorising access to your Xero account.
3. Create Sales Orders in the App: Use the app to manage sales orders, inventory, and customer details.
4. Sync with Xero: Ensure that sales invoices and inventory adjustments are automatically synced with Xero.

Benefits:

• Advanced Features: These apps often include features like inventory tracking, backorders, and fulfilment management.
• Efficiency: Automating the sync between sales orders and invoices saves time and reduces errors.
• Scalability: Suitable for businesses with high order volumes or complex workflows.

Limitations:

• Additional costs for subscriptions to third-party apps.
• Some integrations may require technical setup or ongoing maintenance.

Choosing the Best Method for Your Business

The best approach to managing sales orders in Xero depends on your business size, complexity, and budget:

• Small Businesses: If you have simple sales processes, using quotes or draft invoices may be sufficient.
• Growing Businesses: As your business grows, consider integrating a third-party app to streamline operations and enhance order management.
• Inventory-Heavy Businesses: Companies with significant inventory needs will benefit most from apps like Unleashed or Dear Systems.

Conclusion

While Xero does not have a built-in sales order feature, its flexibility allows businesses to manage sales orders effectively using quotes, draft invoices, or third-party integrations. Each method has its benefits and limitations, so choose the one that aligns with your business needs.

By adapting Xero to handle sales orders, you can streamline your sales process, improve customer satisfaction, and focus on growing your business. Whether you’re a small business owner or managing a complex operation, these strategies will help you make the most of Xero’s capabilities.

If you’ve found a unique way to manage sales orders in Xero or have questions about the methods discussed, share your thoughts in the comments below. Let’s learn from each other’s experiences!