Understanding the Xero Integration

https://www.youtube.com/watch?v=HgkJ-K_SNvg

Note: It is important that you have a basic knowledge of Xero and that you are able to setup a ‘New Organisation’ as a trial.  For the purposes of the initial test you can use the default Xero chart of accounts. We do not support integrations that are not carried out by members of Arthurs financial team. To see costs for us to integrate the two systems please go to the store.

*Please read this article carefully before commencing with the integration. 

Please remember that you cannot roll back Xero if you make a mistake!*What you can achieve The integration is a ‘best of breed’ approach to ensure powerful and comprehensive accounting combined with exceptional property management functions right from your mobile app through to the back office allowing you to produce powerful financial reports and forecasting. The online bank feed function in Xero empowers you to get from the bank statement to the property owner statement, effortlessly, accurately and quickly. 

The idea behind the integration Xero is a powerful, simple to use accounting package with an automated bank feed function that will literally transform how you can reconcile your rent roll. To get the true benefit of the integration Xero should be configured to encompass all aspects of your property company.  This isn’t just tenant and property owner transactions (such as remittances and rent demands), but all aspects of the company such as loans, mortgages and building/refurbishment costs. General administration costs, payroll costs (if applicable) and credit card bills can all be included if required. In effect Xero should be setup so that you can produce a complete set accounts for your company. Arthur is a powerful management, maintenance and communication tool and is very good at charging rents, collecting commissions and creating unusual charges particularly where sharers are involved. It is a perfect feed for Xero in this respect as it can handle unusual charging schedules for sharers and automatically charge management fees etc. 

How the systems fit together  Generally speaking you will either be integrating Arthur to an existing implementation of Xero or starting from scratch with a clean Xero chart of accounts. Either way the approach is the same in terms of configuration.  When reading this guide it is important to remember that Arthur only represents an element of Xero.  For example Arthur will post information into Xero regarding rents, disbursements or commissions etc, but the information is only part of the overall picture which represents true position of your business. The general principal of the integration is:-

1. Tenant. Arthur generates rent and associated tenant charges and these are posted to Xero as Sales invoices. In Xero tenants are created as Customer Accounts (linked to their tenancy ID eg TE1000).

2. Property Owner. Generally speaking these are two scenarios ( and you may operate with one or both of them

• You own the property, the rent is considered as income, you do not charge commissions and do not have the need to produce a produce Property Owner statements. In other words you just want to collect the rents and get them into Xero as part of your overall portfolio.
• You do not own the property, you charge fees and you remit funds less disbursements to the Property Owner and need to hold a Property Owner statement.

Under scenario (a) the only financial link between Arthur and Xero is in relation to the tenant. All rents charged by Arthur will be posted into Xero and all receipts taken from the Xero bank feed will update the Customer account in Xero and the Tenant record in Arthur.  So at any one time the tenant account in Arthur will always match its respective counterpart in Xero. All charges in relation to the property are managed through Xero so as an owner you will be able to produce solid financial reports such as P&L / Balance sheet / Trial balance and forecasting. Under scenario (b) you need to operate both a Tenant ledger and a Property Owner ledger in Arthur and in Xero. In Xero, Property Owners are created as Supplier Accounts, the logic being that you pay suppliers on a regular basis (i.e. paying the Property Owner as though they are suppliers).  Received rents from tenants and any fees/disbursements are automatically posted as ‘Purchase Invoice’ against the Supplier. The draft invoice which is a collection of charges and receipts accumulate until such time as you remit to the Property Owner at which point it is authorised and paid off. Once this has happened it then appears as fully paid invoice in the Supplier record in Xero.

3. Profit & Loss Analysis. Every transaction that passes into Xero can be categorised into cost/income groups.  Xero allows up to two of these groups to be setup using what are called ‘tracking codes’. As a default Arthur uses tracking code 1 as a unit identifier and tracking code 2 as a property identifier.  However if you already have tracking codes setup for other things such as property type or area these can be assigned within Arthur to ensure that transactions are correctly analysed.

Tracking codes really come into their own when running Profit and Loss reports within Xero.  As well as being able to produce a single report for your company you are also able to select individual codes or a group to show an extended report with multiple columns, each one appertaining to the selected tracking code.  It is ideal for seeing the profitability of your portfolio by property or area etc.

4. Which system should disbursements and ongoing charges be keyed into?

We recommend that disbursements in relation to properties that are held on Arthur, are done in Arthur. When a disbursement connected to a contractor is added to Arthur, this will create 2 transactions. One posted to the respective tenant/property owner account and the other against the contractor.  This approach will enable you to manage contractor payments independently of your tenant/property owner but also ensure that you haven’t neglected to post any bills to all the respective ledgers. Please note that Contractor charges are posted directly as purchase invoices to a supplier in Xero. All non-tenancy related transactions such as wages/mortgages/accounting fees etc must be posted in Xero as they are not connected in any way to Arthur. Only contractors that have been created in Arthur will be updated by any charges that have been made in Xero. So if you have created a supplier in Xero (i.e. your accountant) these charges will never come across to Arthur.Things to consider before starting the integration:

• If you are running multiple organisations in Xero you will need a separate each instance of Arthur for each of the respective organisations in Xero.
• You need to subscribe to a ‘standard’ version of Xero for use with Arthur.
• Establish what type of a portfolio you have. If you own properties where the rent is effectively your income then you will setup Xero slightly differently to if you are collecting rent on behalf of a property owner and passing it over (see above)
• Determine whether you want to hold a complete set of transactions within Xero from the start of the accounting year or whether you want to start the ledgers from a point in time and use opening balances.
• Make sure you can clearly identify your rent arrears and try and put yourself in the position of having remitted to all your property owners at the time of go live (i.e. minimise the amount of outstanding balances to property owners).
• Deposits and on account rent receipts in Arthur will go across to Xero as ‘Overpayments’. This means they affect the bank balance which could be a problem if they are already included as part of an opening bank balance in Xero.
• Question how you want to setup tracking (see above).
• If you decide to run a full year of transactions between the two systems, the best approach is to build the accounts on for the first month, sync the two systems, reconcile the bank feeds in Xero and then check the reports. Once this is done and any adjustments made, you will then prepare Arthur to post in the remaining transactions to date and go through the task of reconciling them through the bank feed until you are up-to-date.
• Please remember that this guide is designed for a standard integration with default values. If your Xero is complicated or unusual or you have some specific reporting needs, please call us to discuss.

You need to be mindful that you cannot ‘rollback’ Xero or Arthur. This means that if you inadvertently post hundreds of transactions between the two systems, you will have to manually reverse them out!!  For this reason we advise that repeated tests and checks against a test Xero organisation are done before you finally connect to your live one.

Before you integrate with Xero you must:

1. Make sure that the Forename and Surname fields in Xero are populated (if you are posting from Xero to Arthur)
2. For each of the tenancies check that the email addresses in Arthur for tenants are formatted correctly and that you only have one email address per occupant/tenant
3. Ensure that you have the correct "default bank account" set up in Arthur
4. Check the default bank accounts and rent accounts are correct for each of the tenancies 
5. Ensure that all units and properties have owners assigned to them 
6. Ensure all your recurring charges are setup properly 
7. Ensure all your registered deposit charges and registered deposit receipts are correct
8. Ensure that all your bank accounts in Arthur have the bank account name, sort code and account number fields completed 
9. Look at the tenant balances, property balances and tenant deposit balance report and satisfy yourself that they are correct.

If you are setting up a new Xero account, please read "Setting up Arthur with a clean Xero Account"

If you have an existing Xero account, please read "Setting up Arthur with an existing Xero Account"