How to Pay a Subcontractor in Xero

As a small business owner, it’s important to have a streamlined process for paying your subcontractors. With Xero, the popular accounting software, you can easily manage payments to your subcontractors. Here are the steps to pay a subcontractor in Xero:

Step 1: Set up the subcontractor in Xero

The first step in paying a subcontractor in Xero is to make sure that the subcontractor is set up in your account. Go to the “Contacts” tab and select “Suppliers”. Click on “Add Supplier” and enter the subcontractor’s details, such as their name, payment terms, and contact information.

Step 2: Create a bill for the subcontractor

Once the subcontractor is set up in Xero, you can create a bill for their services or products. To do this, click on “Bills to Pay” and select “New Bill”. Enter the details of the bill, such as the subcontractor’s name, the date of the invoice, and the amount owed.

Step 3: Assign the bill to a purchase order (optional)

If you have a purchase order for the subcontractor’s services or products, you can assign the bill to the purchase order in Xero. This will help you keep track of the order and ensure that you are paying the correct amount. To do this, click on “Assign Purchase Order” and select the appropriate order.

Step 4: Approve the bill for payment

After you have entered the bill, you will need to approve it for payment. To do this, click on “Approve for Payment” and review the details of the bill. If everything is correct, click on “Approve” to move the bill to the “Awaiting Payment” tab.

Step 5: Pay the subcontractor

To pay the subcontractor, go to the “Awaiting Payment” tab and select the bill you want to pay. Click on “Pay” and select the payment method, such as a bank transfer or check. Enter the payment details and click on “Add Payment”.

Step 6: Reconcile the payment

After you have made the payment, you will need to reconcile it in Xero. To do this, go to the “Reconcile” tab and select the relevant bank account. Find the payment you made to the subcontractor and select it. Xero will automatically reconcile the payment with the bill.

In conclusion, paying a subcontractor in Xero is a simple and straightforward process. By following these steps, you can ensure that your payments are accurate and recorded correctly in your accounts.