Topic
If you have noticed a small difference in the tax total on your quotes in Tradify compared to your invoices, this article explains why this happens and how to resolve it.
How Tradify Calculates Tax
Tradify supports two methods of tax calculation:
- Per line item: Tax is calculated and rounded on each individual line item. The rounded tax amounts are then added together to produce the total tax.
- Per document: Tax is calculated on the overall document total, rather than on each individual line item.
These two methods can produce slightly different tax totals due to rounding being done at different stages in the process.
Xero's Default Tax Calculation Method
When your Tradify account is connected to Xero, tax on quotes and invoices is always calculated per line item. This setting is enforced automatically and cannot be changed in Tradify's settings.
This is because Xero uses the per line item method to calculate tax. To ensure your invoice totals stay the same in sync between Tradify and Xero, Tradify must calculate tax the same way. If the two methods didn't match, you could end up with discrepancies between your Tradify Invoices and your Xero accounting data.
For more detail on how Xero handles rounding, you can refer to Xero's own documentation:
Correct a Rounding Difference
If the rounding difference is causing an issue on a specific quote when copying to an invoice, you can resolve it by adding a miscellaneous line item with a small negative amount to account for the difference.
To do this:
- Open the quote in Tradify.
- Add a new Miscellaneous line item at the bottom.
- Set the description to something like "Rounding adjustment".
- Enter a negative value (e.g. -$0.01) to offset the difference. ( not negative quantity)
- Select Save or Approve.
Note: This is the same approach recommended by Xero for handling rounding differences in their platform.
Additional Information
For more information on tax settings, see here: 🎬 Tax Settings
Comments
Article is closed for comments.