Purchase ledger checks for UK businesses on Xero: a practical checklist

The purchase ledger is where small errors quietly turn into real money. A duplicate gets paid twice. VAT is reclaimed on a document that doesn't support it. A delivery comes up short but is billed in full. None of it is dramatic, and all of it is cheaper to catch before payment than after.

This is the checklist we'd hand to anyone running the purchase ledger for a UK business on Xero, split by when each check belongs. Print it, adapt it, give it to your bookkeeper.

On every invoice, before it’s approved

1. Is it an invoice, and is it addressed to you? Not a quote, pro forma or statement. The bill-to name should be your company's legal name, which matters most if you run more than one company.
2. Have you seen it before? Look for the same supplier and invoice number, or the same amount on the same date. Duplicates often arrive twice: once by email and once by post, or as a “copy” sent with a payment reminder. More in how duplicate invoices slip through.
3. Does it match the purchase order? Same supplier, same items, the agreed unit prices, and no more than the quantity ordered. If you don't raise POs, check it against the quote or contract instead.
4. Did the goods actually arrive? Check the quantities against the delivery note or goods received note (GRN). An invoice for 75 units when 60 arrived is the classic miss: the total looks reasonable, so nobody questions it. See 2-way vs 3-way matching.
5. Is the VAT right? A full VAT invoice shows the supplier's VAT registration number, the rate and VAT for each rate charged, and totals that add up. A UK VAT number is usually GB followed by nine digits, and you can check it with HMRC's Check a UK VAT number service.
6. Should the reverse charge apply? For construction services between VAT-registered businesses under the Construction Industry Scheme, the domestic reverse charge usually applies: the supplier shouldn't charge VAT, and the invoice should say so. If VAT has been added anyway, ask for a corrected invoice.
7. Is it coded to the right account and VAT rate in Xero? How you coded this supplier last time is a good starting point, but read the lines: suppliers change what they sell you.
8. Has the right person approved it, knowing about any problems? If someone approves an invoice that didn't match, write down why. Six months later, “agreed price rise with the supplier, email of 14 May” is worth a lot more than a tick.

Every week

• Pay only approved bills. Before releasing a payment run, check its total against the list of approved bills. A bill that went straight to “awaiting payment” without approval should stand out.
• Treat bank detail changes as suspicious until proven otherwise. Invoice redirection fraud works by emailing a convincing “we've changed banks” letter, sometimes from a real supplier's hacked mailbox. Never update bank details from an email or from the invoice itself. Call the supplier on a number you already hold, not one in the message. When your bank's Confirmation of Payee check says the account name doesn't match, stop and ask.
• Chase credit notes. Short deliveries, damaged goods and returns should each produce a credit note. Ask for it, then allocate it against the bill in Xero so it isn't forgotten.
• Look at bills waiting for approval. Anything waiting more than a week usually means a question nobody has asked. Ask it.

At month end

• Reconcile your main suppliers' statements. Compare each statement with what Xero shows you owe that supplier. Differences are almost always a missing invoice, an unallocated credit note, a duplicate, or a payment still in transit.
• Accrue for goods received but not yet invoiced. If stock arrived this month and the invoice hasn't, your costs are understated. See the invoice arrived before the goods for the reverse case.
• Tidy open purchase orders. Close POs that won't be billed, and look at POs that are partly billed. See how to use Xero purchase orders with bills.
• Review aged payables. Paying late costs more than goodwill. Under the Late Payment of Commercial Debts (Interest) Act 1998, a supplier can claim interest at 8% above the Bank of England base rate, plus a fixed sum for each late invoice. Slow approval is a common cause, so the checks above should be quick as well as careful.

Before each VAT return

• Making Tax Digital. VAT-registered businesses must keep digital records and file VAT returns through compatible software, which Xero is. The return is only as good as the bills behind it.
• Spot-check input VAT on your largest bills. Do you hold a valid VAT invoice for each? Bills entered from a pro forma or a statement are the usual problem.
• Look at bills where Xero's VAT differs from the invoice by a few pence. It's usually rounding, and it's explained in why your Xero bill is a few pence off the invoice.

Where Xero helps, and where it doesn’t

Xero is good at the ledger itself: bills, purchase orders, repeating bills, approval statuses, payments and the VAT return. What it doesn't do is check a supplier's invoice against the purchase order and the delivery note for you, or hold an invoice that doesn't match. That part of the checklist is still manual in most businesses.

How Tenet helps

Tenet does the per-invoice checks from the first list. Invoices arrive by email or upload. Tenet reads each one, checks the VAT and arithmetic, and looks for duplicates. On the Match plan and above it also checks the supplier's name and VAT number against the purchase order, and matches the lines to the PO and, if you record deliveries, to the goods received note, with price and quantity tolerances you set per supplier. Anything that doesn't match is held with a plain-language reason. A person approves every invoice, with a reason required to approve past an issue, and only then is the bill posted to Xero with the original invoice attached and the invoice's own VAT.

Tenet doesn't verify bank details or reconcile supplier statements, so keep those steps. There's a 14-day free trial with no card needed.