Classify new contacts as customers or suppliers
Xero automatically classifies contacts as customers or suppliers once you've entered an invoice, bill, or credit note transaction for them. This page explains how the standard contact groups work, and how to create temporary groups if you need to manually classify contacts before you enter their first transaction.
All contacts group
All contacts you've added or imported into Xero display under All.
Customers and Suppliers groups
Once you've entered a contact's first sales invoice, bill or credit note, your contact will also display under the Customers or Suppliers group (depending on the type of transaction you entered for them). If you void this first transaction, your contact is removed from the Customers or Suppliers group, and displays only in the All group.
You aren't able to add contacts to the Customers or Suppliers group - Xero does this automatically.
Create temporary groups to classify contacts as customers or suppliers
If you need to classify contacts you're expecting to become customers or suppliers, create your own contact groups, then add your contacts to these groups temporarily.