ERPAG 5.1

XERO & ERPAG integration

xero and erpag

1. Introduction

One of the advantages of cloud applications (and ERPAG) is the ability to easily share data. The technology used is the Application programming interface (API). In general, the end user does not even care what technology is being used, so in this text we will focus on user work when integrating ERPAG and XERO.

Xero is accounting software (or as they say "Beautiful Business & accounting Software"), and through connectivity you get the possibility that your accountant (who, of course, uses Xero) can effectively run your business books.

A list of documents that are posted in Xero through API.

erpag and xero document list

Items list:

erpag and xero items list comparison

Note: Items are searched and compared through "SKU" (https://www.erpag.com/news/what-is-sku)

Customer / Supplier:

erpag and xero business associates comparison

Note: Contacts are searched and compared through "account number" in Xero, or "key" in ERPAG.
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2. Connecting ERPAG and XERO

At the time of writing this blog, ERPAG is not listed on the Xero App Marketplace yet (the process is ongoing), but this does not stop us from fully utilizing the integration.

erpag and xero

In the Administration panel, in the Integrations section, we have anoption "Xero".

connect erpag and xero

Click on "Connect to Xero". After that, the page for entering Xero credentials will load.

xero login

After this step, you need to confirm access in the next 30 minutes.


Note: Since ERPAG is not listed on the Xero App Martketplace for now, you will only be allowed access for the next 30 minutes. When the period expires, you can easily extend it by confirming.
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3. Products and services - Accounts

On each item (Product or service) it is necessary to set up an Account from Xero.

• Expense account
• Income account
• Inventory asset account (for the product)

You can adjust each item individually, in the "XERO" section:

erpag xero accounts

Or through the bulk action:

erpag xero accounts bulk action

xero accounts bulk action

Also, you can set up the "default value" for newly entered items (or imported ones):

xero accounts default value
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4. Settings - Value Added Tax (VAT)

For general information about working with VAT you can find on the following link https://blog.erpag.com/2019/08/the-value-added-tax-vat-in-erpag.html

If your tax system is Valued Added Tax (VAT) you need to "match" tax rates from ERPAG and Xero.

There are two ways to do this:

  • Tax location

tax location

For each tax category you have to select appropriate rate for "Output VAT" and "Input VAT".
  • Tax category

tax category

Here you have to select appropriate tax rate from Xero for each tax location.
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5. Settings - Sales Tax (USA)

If you are based in USA, your tax system is a Sales Tax. For more information about working with Sales Tax in ERPAG, you can read on our blog: https://blog.erpag.com/2019/08/setting-up-us-sales-tax.html

Invoiced Sales Order from ERPAG:

erpag invoice

Result in Xero:

xero invoice

Tax Rate from ERPAG will be automatically created in Xero.

xero sales tax

Note: Auto Look Up US tax rates through API keys is not possible.

auto look up sales tax
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6. Synchronization  (ERPAG – XERO)

The part of application that is used to synchronize the data is located in the Accounting section.

erpag xero synchronization

For practical reasons we did not want the data to be sent automatically immediately after the documents were created. It has been shown from practice that the data exchange process can take some time and may be partially inaccessible. For example, we create invoices through bulk action and the API service returns the message "too many requests", because each API service has limits in order to prevent its fall. Accountants also prefer to have the appropriate document type first (supplier invoice first and then our invoice).

We send information at our request. Each document must be selected and then "sent" via bulk action.

syncing documents to xero

send documents to xero

The sent document will get a status "Synchronized" or "Error". Documents with the status "Synchronized" are removed from the list. If we want to show them, we have the option "Show - Synchronized".

syncing error

In front of the "error" status, we have a "info button", where we can review the reason of the error and eventually an option how to resolve the problem.

error description

In our example, click on a "setup" would lead us to set an account for an item.

adding xero accounts to products

With bulk action, we have a few more options.

bulk action option

• Status - On Hold

Selected documents are assigned "ON HOLD" status. They appear in the list but they will not be able to sync until the status changes to "READY".

• Status - Ignore

Documents with this status will disappear from the sync list (they can be seen if  "Show Synchronized" is turned on, and you will not be able to "send" them to XERO. This is done in cases when document does not need to be sent to Xero (e.g. Voided or entered manually).

• Status - Ready

This option returns documents with the status "On Hold" or "Ignored" so that they can be synchronized again.

• Delete / Void (Xero)

This deletes the synchronized documents (if in Xero status is "draft") or voids (if status is "approved") from Xero. After Delete / Void they will get a status "Ready".
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7. Supplier Invoice (Purchase order)

In the following topics we will explain how each document is transferred to Xero. Of course, our first document is a Supplier Invoice or Purchase Order.

A Purchase Order layout in ERPAG that has a Supplier Invoice generated.

invoiced purchase order

Bill layout in Xero

bill xero

Each document that is sent to Xero has a "draft" status, so it is necessary for the accountant to do "Approving".

The same principles that apply to Bill, they also apply to Landed Cost and Contractor Bill.

With VAT, we sometimes do not have the right to have Input VAT as Deductible. This VAT value can be allocated as a "landed cost" and subsequently be a cost as a Cost of Goods Sold, or immediately to be a cost like a Tax Expense.

It is necessary to specify "Tax Expenses" in the Xero parameters.

tax expense xero

An example of Deductible: No - Tax expenses.

utility bill tax expense

And a result in Xero:

utility bill xero
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8. Invoice (Sales Order)

Only sales orders that have status Invoiced will be offered for synchronization. The list will not include sales orders that have non-packed items for which you already created an invoice. In this case, you must complete the packing.

invoice erpag

And the document in Xero

invoice xero

Note: All prices in ERPAG are Tax Exclusive and they are transferred as such to XERO.

Customer return (and voided) will be "Credit note" in Xero

credit note erpag

And a result in Xero

credit note xero
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9. Work Order (Manufacturing)

Xero doesn't have a specific document for work orders, or for manufacturing in general.

work order erpag

In order to achieve adequate accounting and inventory control, two dummy documents will be created during synchronization.

• Dummy invoice - where material is "removed" from inventory and Cost Of Goods Sold (COGS) is formed.

xero dummy invoice

• Dummy bill - where a product is "added" to inventory.

xero dummy bill

You will notice that the value here is "0", in order not to form a payable / receivable account.

When a product 01 is sold, COGS will not be re-formed because its stock price is 0. COGS is already posted through the "dummy invoice".

For more information check out our blog on a similar topic: https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html
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10. Stock adjustment

These documents are synced in a similar way as Work Orders.

stock adjustment erpag

• "Dummy invoice" - reduces/decreases the amount in stock.

dummy invoice xero

• "Dummy bill" - Increases inventory counts.

dummy bill xero
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11. Multi currency

Both in Xero and in ERPAG, working with multi-currency is supported. The currency needs to be opened in ERPAG and Xero

multi currency

xero multi currency

An example of a Sales order with a different currency (USD is a domestic currentcy)

sales order multiple currency erpag

And a result in Xero after synchronization:

sales order with multiple currency xero
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2019. ERPAG Inc

ERPAG 5.1

The Value Added Tax (VAT) in ERPAG


VAT countries

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1. Introduction

There are two types of tax systems in the world. Sales Tax used in the USA:

1. Sales Tax - still used in the USA (and a few other countries)


For more information on ERPAG's work with this system, visit our blog:
https://blog.erpag.com/2019/08/setting-up-us-sales-tax.html

2. Value Added Tax (VAT) - that is used in the rest of the world

The VAT was initially introduced in the mid-1970s by the European Economic Community (ECC). With the formation of the European Union and the admission of new countries in the late 1990s and 2000s, a large number of countries have changed (or adjusted) the tax system. We, a company that has been in the business software market since 1995, have been through this transition with our customers without any major problems. Because of back-compatibility, ERPAG supports both systems (from MS-DOS version, over Windows Desktop, to the current cloud-based version), so this gave us global access.

In this text, we will focus on setting up and operating with the VAT system.

First, tax settings are divided into three sections.

tax settings

1. Tax category 

Tax category marks the tax category of an item, to which tax category the item belongs to. If our item is a solar panel, it will belong to "Energy-saving materials" tax category.

2. Tax location

This data marks the place where the tax is calculated. In case the buyer of our solar panel is from another EU country, the tax location will be Export (EU). Maybe on the first glance our examples of "Export (EU)" and "Export (non-EU)" give the same result, eg. the tax rate of "0", but that is a common practice in order to obtain more precise reason of tax exemption. This can also be demanded during the integration with other applications (such as QuickBooks Xero, TaxJar, etc.).

3. Tax rates

In this panel you are naming the individual tax rates, in most of the cases it's "Standard rate" and "Reduced rate". But in some countries, there are additional tax rates, for example, in Greece, there is also "Super reduced rate".

The tax rate is calculated as a result of these three parameters.

 By entering the tax category, we already mark to which tax location a specific tax rate belongs to.

tax category settings

We can do the same thing when we are entering the tax location.

tax location settings
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2. Tax Category

Each item in ERPAG must belong to a tax category.

The setup is done in the item settings.

item tax settings

In our example, we will have three products and one service.

products and services taxes

Note: All prices entered in ERPAG are without VAT (tax)!
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3. Sales order

Upon creating a sales order, the important field is the "tax location".

sales order tax locations

Like we already mentioned, ERPAG calculates the tax rate based on the tax location and tax group of an individual item.

If we change the Tax location, the tax rate will be recalculated automatically based on new parameters.

sales order tax location

Which means that in our case, the tax rate is "0".
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4. Tax by origin

This means that the tax location depends on the country from which the items are being sold/shipped (most commonly from a warehouse). So each warehouse you own needs to have a specific Tax Location.

tax location by origin

In customer, we set up the tax location to be "The same as the warehouse".

tax location customer

Now when we choose a customer, the tax location will be the same as our warehouse.

In our case, for "FR Customer" and "Main warehouse" the tax location is "Domestic trade", eg. the tax will be applied even if our customer is foreign.

sales order tax location

 If we select "Bonded warehouse", then the Tax location will be the same as that warehouse (Export) and the tax rate won't be applied.

sales order tax location
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5. Tax by destination

This Tax type means that the Tax Location is where the customer is (where the items are shipped). Based on this principle, we are assigning a Tax Location to a customer.

customer tax location

When entering a Sales Order, no matter which warehouse we choose, the proposed and automatically setup tax location is the one assigned to a customer.

sales order customer tax rate

The data about the Tax Location is changeable, since even though the customer is foreign, in some cases it's considered as a "domestic trade" (for example, if they purchase items for local representatives).
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6. Combination - By origin/By destination

Depending on national tax regulations, there are cases of a combination of both principles.

An example is that VAT is levied on services rendered and exported to EU countries.

When setting up the Tax Category (or Tax Location), the tax rate for the corresponding Tax location (or tax category) is entered as well.

service tax setup

In our example, we will enter 20% in Tax Location for Export (EU) for Tax category "Services".

Note: Changes in tax rates are effective from that moment. ERPAG does not know from when to when the tax rate applies. So when changing tax rates, you have to do all the documents with the old rates.

Now the result of the calculation in our sales order is a Service tax even though the Tax Location is setup to be "Export (EU)".

sales order service tax
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7. Point of sale (POS)

point of sale tax

In our POS section in ERPAG, the proposed tax rate is "By Origin" (by tax location of a warehouse).

point of sale tax

Of course, there is a way to change it (for example, if the items are shipped to the buyer's address).
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8. Mobile APP - Point of sale (POS)

taxes in mobile app point of sale

For the POS part, the tax rate in the mobile APP is always according to Tax Location Warehouse, for now. Due to the simplicity of the process and the reduction of errors, we did not include the possibility to change the Tax Location. If necessary, post it as a Sales Order and change the Tax Location from the main application (desktop application).
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9. Purchase orders and utility bills

There is a separate Input tax section for the purchase orders (identical to utility bills, landed costs, contractor bills).

input tax purchase order

The amounts entered here are always entered in absolute (total) amounts for the entire document (not as a percentage amount). We opted for this solution because most Sales Orders and Invoices have sub-total + tax = total at the end of the recapitulation. And it would also be quite impractical to enter a specific tax rate or tax amount for each item individually.

When entering, there is a field "Calculation (VAT)", if it is set to "automatic", then ERPAG automatically calculates the input tax based on Tax Location and Tax Category.

input tax calculation

If set to “Manual entry” then the tax rates must be manually entered.

input tax manual entry

We included this because sometimes the amounts of VAT we charge differ from those provided by the supplier. This happens with Imported goods because VAT is charged at customs. It also happens when a supplier calculates VAT at a reduced rate while we sell at a standard rate.

Tax location is always suggested by our warehouse.

One of the significant parameters is "Deductible (VAT)". There are cases in national tax regulations where no matter if the supplier has shown us Input VAT, we do not have the option to deduct it from Output VAT. This would be the case if we are purchasing something that is not directly for business purposes (eg. business entertainment costs).

deductable vat

  • Deductible: "Yes"
Input VAT is possible to be deducted from the output VAT.
  • Deductible: "No - Tax expenses"
The VAT charged by our supplier cannot be deducted from VAT output. The tax amount will be credited to the "Tax expenses" account.


tax expenses

Note: If you have integration with QuickBooks or Xero accounting software, it will be accounted to an appropriate expense in their journal voucher as well.
  • Deductible - "No - Inventory"

In this case, non-deductible VAT will be added to the stock price as the landed cost (Inventory). And it will become a cost when the Cost of goods sold (COGS) is formed.

deductible input tax

Note: In case you have some items for which you can deduct the VAT and for some of them you can't, you need to split that document into 2 (Deductible: Yes, and Deductible: No).
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10. Import goods (International trade)

The approach for importing products is slightly different. First, you must set up the Tax Location of the supplier.

supplier tax location

We have two options available: Domestic trade and International trade. When importing, of course we have to select "International trade".

When a Supplier that has an international trade is selected when you create a Purchase Order, new fields will be included.

purchase order import vat

  • Custom note - Document number from the official customs office or freight company;
  • Custom duty - Total duty charged (with all associated costs);
  • Exchange rate - The exchange rate between the currencies if we use foreign exchange;
  • Fx Price - Amount in supplier currency if we use a foreign exchange.

The input tax amount is usually entered manually from the official customs document. The reasons for the deviation are different from the amount of the customs base to the exchange rate differences.

Tax location has been suggested according to our warehouse but it is possible to change. This is done in case of re-exporting.
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11. Fulfillment (backorder) and input VAT

VAT in fulfillment

When you form a document through the fulfillment (backorder) window, the generated purchase orders will have automatically calculated input VAT.

purchase order vat

If it's needed, you can manually change the document.
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12. Review of accrued tax

Note:

ERPAG is primarily intended for internal business management, please contact your accountant or tax advisor to calculate taxes and other obligations.

Tax-related reports are for informational purposes only, and serve to ensure that management has some information about tax liabilities.

We do not recommend or have any obligation, warranty or liability for filing tax returns based on reports from ERPAG.

To receive the Standard / Reduced report, you must enter the "Tax Code" at Tax rates (if you do not enter the tax code, the report will be compiled).

tax code setup

The "Tax preparation" report is in the accounting section:

tax preparation report

Anyone who is familiar with the VAT tax system, he is already aware that the obligation to pay VAT is the difference between Output VAT (paid from customers) and Input VAT (paid to suppliers or during import).

accounting

Accountants usually create the statement through a manual journal voucher. The dynamics depend on local tax regulations but are often done quarterly or monthly. This report shows the data necessary to calculate the liabilities.

tax preparation report

The report is initially grouped by warehouse and tax rates, with values in the following columns:
  •  Input VAT - amounts of VAT from Purchase Orders (Supplier Invoices) that are not used in the calculation;
  • Output VAT - amounts of VAT from the Sales Orders (Invoices) which are also not used in the calculation;
  • VAT Liabilities - the amount of payables that have been calculated but not paid.

To facilitate this process, there is a "VAT calculation" option in the report.

VAT calculation

The VAT calculation is done for a specific period of time, and a journal voucher is formed in accounting.

vat calculation

In our example, there is an only liability for VAT-20, with a VAT-5 Input VAT is greater than the Output VAT, so there is no obligation to pay.

NOTE: The internal accounting system in ERPAG is managed according to the accrual basis method of accounting. In most national accounting regulations, cash basis is not allowed in manufacturing.

Due date is the date when the accrued liability should be paid (the setting is in Administration -> Localization).

We use the "payment" option to record the payment of this accrued liability.

recording vat payment

Payment amounts are divided into "overdue" (what we were supposed to pay, the due date has passed or is today) and "Expected" (due date is in the future). The total amount is suggested, however, it's your choice which amount you will record.

Now, in our example, the report looks as follows:

tax report
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ERPAG Support