How to Handle Back Orders and Sales Orders in Xero

Backorder issues in XERO solved

As we started to make our integration with Xero, we discovered a few interesting differences between Xero and other accounting systems.

One of the biggest differences we saw – and perhaps the most surprising one – is that Xero doesn’t have sales orders.  This is a standard feature in most accounting software, where you have an inventory system.

For many businesses the lack of sales orders is a deal breaker.   For a start – if your need to put something on back order due to having no stock, then Xero cannot help you – it gets cumbersome and messy to try to work around and you’re back using Excel Spreadsheets.

The alternatives are to have a sales order app for Xero, some kind of Sales order add on – or work with an integration partner like Tall Emu who has a Xero inventory add-on.

Who needs to handle back orders?

So who needs back orders or sales orders anyway?   Well, we think most businesses are going to need them.

  • If you’re warehousing and using Xero, you will probably run out of stock of products from time to time.
  • If you take orders, invoice and receive payment before placing an inventory order with a supplier you’ll need to generate sales orders which will be invoiced later, and keep the unavailable items on back order.
  • If your order process is Quote > Quote accepted > Order confirmation to client > Build/Buy > Ship > Invoice – you’ll need back orders and sales orders.
  • If you are a business that assembles and ship orders to customer requirements.
  • If you want the customer to pay prior to producing their stock
  • You want to have negative stock on hand (SOH) .

As you can see – it’s quite a common requirement for many types of business.

How can Tall Emu help this process?

Xero has no order management apart from quote accepted or not.   Tall Emu implements a rich product, stock and sales structure. For this description, I’ll just use simple items although it is worth noting that we have very rich product options including variant products, virtual products, and configurable/configurator based products with BOM type capabilities currently being converted from our desktop product.

Multi-Location Stock

We allow stock items to be tracked over multiple locations.  There’s no practical limit to the number of locations that could be defined, so you can use them for the normal physical locations like warehouses – but also for things like “Goods Inward” or “In transit”.

Sales Orders

Sales orders can be input directly, created from quotes or imported from other sources.

For stock tracked items, as you enter data into the sales order, we’ll check stock – and automatically update the back order amount in the user interface.   Importantly, it is also possible to simply manually add an item on back order for any reason you like. It may be that you or the customer wants part supply, you may know your stock number is wrong – or you may just want to part-supply for operational reasons.

Sales Order Line

Sales Order Line entry showing back order

Once the Sales Order is saved, we colour code the back order field in a simple ‘traffic light’ pattern.  For example, in this case we have 10 on back order – but the system knows we have stock to supply, so the colour coding lets us know we can supply if we want to.  It doesn’t force us, but it does let us know.

If you save an order, and lets say another user beats you to the punch and your order is forced to back order then the field will be colour coded as red. It cannot be supplied.    If the order could be partly supplied, the colour coding will be orange.

StockAvail

Sales order line when product is available to fulfil backorder

This works of automatically for stock tracked items.    It’s also possible to place non-inventory items on back order.  It just means that you have to manage release from back order yourself, because the system has no way of knowing what’s in stock.

How does Sales Orders and Back Orders work with Xero?

It’s actually quite simple.  The CRM keeps track of the stock and the sales orders, and the invoices are sent to Xero as required.   As Xero doesn’t have sales orders (and they’re really just an interim processing step on the journey to an invoice) there’s nowhere sensible to put them in Xero, and thankfully no accounting need for them.