Getting the most out of bank rules on Xero

Ever wanted to know how to use bank rules on Xero?

Here are some tips to ensure you get the most out of them from XU magazine.

Bank rules are a fantastic tool to use in Xero, which can significantly speed up the bank reconciliation process. However, they are also something I regularly see being set up incorrectly.

With this step by step guide I am hoping to make the set up process easier for you, while covering the common pitfalls I come across. For each section I have included my suggestions in bold for quick reference, with a more detailed explanation below.

Rules are ideal in cases where the transactions are relatively consistent in Xero, like a standing order or direct debit, but they cannot be used where you need to match up an invoice, or on bank transfers between the business’ bank accounts.

To get started, just click the “Create rule” button above your transaction of choice on the bank reconciliation.

 

 

 

 

 

 

 

 

1. Conditions: “Any text field”, “Contains” and then bank line words only (remove numbers, references and other figures that are likely to change month on month)

When the bank rule is first set up, Xero will suggest a condition to which this particular bank line will adhere to.

The first drop down menu will, by default, be set as either “Payee”, “Reference” or “Description”, depending on what the bank statement text has been imported as. This will differ depending on the bank feed you use, or the option you select when importing statements manually via CSV.

I would suggest changing this to “any text field”, which is more flexible and will future-proof the rule against any changes to the bank feed down the line (this happened with one of the partner feeds at the start of this year, and it broke a lot of rules, so they changed it back).

The second drop down menu will default to “equals”, but I prefer to change this to “contains”, as it lets you cut out any references and other information which won’t consistently appear on the transaction. A good example of this is bank charges, which often mention the month they are in respect of, such as “CHARGES OCT14”, where unless you remove the OCT14 part, the rule will only work once a year.

It is also important that your text is in one consecutive string, so in the above example, if you removed OCT, but kept CHARGES 14, the rule will not work, as details were removed from the middle.

2. Contact: “an existing or new contact”, then fill out the name

This will default to either “Payee”, if the bank statement text has been imported under this heading, or “entered during reconciliation” if not.

“Payee” is not ideal, as it will set up and save a contact for you with the exact wording on the bank statement, which isn’t often neat or clear.

“entered during reconciliation” is also worth avoiding, as you’ll need to manually enter a name each time the rule activates, slowing down data entry.

“an existing or new contact” is therefore the best option, as it lets you pick a name from your contact list, or write a new one in, as required.

3. Fixed value line items: Most often left blank

These are usually left blank, but can be very useful in certain cases, such as where a fixed bank charge arises on certain transactions.

As an advanced tip, it is worth noting that minus amounts work in this section. So if, for example, you create a receive money rule on income of £985 which you have received net of a £15 bank charge, you can enter the £15 as a minus in section 3, and 100% of the remainder in section 4 as a sale and it will increase the sales up for you to £1,000.

4. Allocate remainder in following ratios: Fill this section out in the same way you would “create” on the bank reconciliation

Make sure the description in this section is applicable to all transactions which may trigger this rule. Again, in this section the percentages can be entered as a minus, and Xero will be happy with treatment as long as the total adds up to 100%.

5. Set the reference: “from the Reference”

This will default to either “by me during bank rec”, which again requires manual input on the reconciliation and is therefore not ideal, or “from the Reference” if any bank transaction text has been imported under the reference heading.

It is worth selecting “from the Reference” in either case, as even if the bank statement line has no imported Reference, it will just leave this section blank, which is fine as it is rarely important (and if there are references you need to take note of, you should probably be using Xero’s invoicing function and not bank rules).

 

 

 

6. Target a bank account: As required

I often see this being changed to “all bank accounts”, which is usually fine. One case where you may like to define a specific bank account is if you make a catch-all rule, such as any income above £0.01 being put to sales. This is very useful on a Paypal account where only sales appear on the income side, but is not usually so handy on a current account where other income transactions may also arise.

7. Give the rule a title: Supplier name (Account it is allocated to)

It is often worth noting which account the rule is going to post to within the title, so you don’t need to go back and check it later on.

XU magazine is a publication for Xero users by Xero users. There is tons of brilliant Xero content all in one place – it especially digs down into all of those add-ons. Check out www.xumagazine.com which has recently been relaunched with lots of new content.

Duncan Folkes is a Xero specialist at Carpenter Box.

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