How to Record Invoices in Xero (2026 Guide)

Quick answer

Record a sales invoice in Xero from Business, then Invoices, then New invoice (or the quick launch icon). Choose the contact, add one line per product or service with its account code and tax rate, then approve. Approval is the step that posts the invoice into accounts receivable; emailing it to the customer is separate and optional. Payments recorded against the invoice, or matched from the bank feed, move it to Paid.

Building the invoice

Xero’s invoicing screen autosaves once a contact is selected and pulls that contact’s defaults: due date terms, sales account, tax rate, even a branding theme. The work is in the lines. Each line carries a description, quantity, price, account, and tax rate, and each posts independently to the ledger, so a services firm invoicing a project fee plus billable expenses should use separate lines with the fee on a revenue account and the recharged costs on the account your firm uses for recoverable expenses. Item codes speed this up for repeat products and keep descriptions consistent. What deserves a deliberate choice rather than a default:

• The due date. It drives aged receivables and every chase email. Terms from the engagement letter, not the Xero default, should win.
• The reference. Customers pay faster when the reference maps to their purchase order.
• The tax rate per line. Mixed supplies (taxable services with exempt disbursements, say) need per-line rates, and the invoice total tax is just the sum of its lines.

Approve, then send

Draft and awaiting-approval invoices exist only as work in progress; nothing reaches the ledger or the reports until approval. That split is useful in firms where juniors draft and a manager approves. Sending is a second decision: email with a PDF and an online payment link, or deliver through an e-invoicing network where your country supports one, which drops the invoice straight into the customer’s own accounting system. An approved invoice that was never sent is a surprisingly common find during a receivables review; if the Awaiting Payment list has entries the customer has never seen, cash collection is running behind the ledger.

Repeating invoices

Retainers and subscriptions belong on repeating invoice templates: set the frequency, the lines, and whether each generated invoice arrives as a draft, approved, or approved-and-emailed. The considerations mirror repeating bills: fully automatic suits fixed amounts, draft suits anything variable, and an end date tied to the contract stops phantom billing after a cancellation. For fees that vary with usage, generate drafts and let the month’s numbers flow in before approval.

Getting paid and matched

Once approved, the invoice waits for a payment event. Three arrival paths: the customer pays through the payment service link and Xero records the payment instantly; the payment lands in the bank feed and Xero suggests a match against the open invoice; or you record the payment manually on the invoice for cash and cheques. Part payments leave the invoice open for the balance, and short payments deserve a look at unallocated credit notes before assuming underpayment. The full matching detail, including batch deposits and overpayments, is in recording customer payments in Xero.

Common mistakes

• Revenue lines coded to whatever account the contact default supplies, even when this sale is different; the P&L revenue split quietly degrades.
• Editing an already-sent invoice instead of crediting and reissuing, so your ledger and the customer’s copy disagree.
• Approving invoices with placeholder due dates, making aged receivables meaningless.
• Foreign currency sales entered in home currency at a hand-calculated rate rather than as proper foreign currency invoices.
• Deleting voided invoice numbers from sequences that tax rules require to be sequential; void keeps the number, deletion of drafts does not.

Software that helps

• Xero invoicing with payment services attached shortens the invoice-to-cash gap more than any other single change.
• ExpenseFlow works the cost side of the same engagement: billable receipts and supplier bills are captured, coded with the right tax treatment, approved, and posted to Xero, so recharging costs to a client invoice starts from clean data.
• Practice management tools generate invoices from time and WIP and push them into Xero as drafts for review.

Related guides

Continue with recording customer payments in Xero for settlement, credit notes for corrections, and the glossary entries for invoice and sales invoice.