Xero in on Xero
I can remember very clearly the first time I saw Xero demonstrated more than six years ago. I went to an introductory class on Xero and within the first hour I knew that Xero was the cloud accounting solution that I had been looking for. One of the features that I fell in love with that day (and still love) was bank rules.
With Xero you connect bank feeds for your bank and credit card accounts. Bank rules can add an extra level of efficiency to these bank feeds. How so? Bank rules search for specific conditions within your bank feed lines and suggest new transactions to create in your account, without any manual entry. All you need to do is click on OK to create and reconcile.
Simple or complex bank rules
Bank rules can be as simple or as complex as you need them to be. Every bank rule must have at least one condition. But, you can add as many as you need for your specific rule.
Let’s say you generally purchase gas from Chevron. You could create a simple bank rule so that all bank feed transactions that include the word “Chevron” to create a new transaction with the contact name “Chevron” coded to the “Automobile Expense” account.
You can take the next step to make your bank rule even more broader. Let’s say that you purchase gas from various gas stations and you would prefer not to create a contact name in Xero for each vendor. You could create a more complex bank rule for all bank feed transactions that include the word “Chevron” or “Texaco” or “Gas” (and the like) to create a new transaction with the contact name “Gas Station” coded to the “Automobile Expense” account.
Using percentages with bank rules
Xero allows you to create bank rules to allocate transactions by percentages as well. For example, if you are using tracking codes in Xero for departments and need to allocate expenses by department, you can create bank rules to allocate the total to be distributed by various percentages going to each department.
Awhile back we set up extensive bank rules for one of our clients using tracking codes. For example, if we wanted to allocate the expense for their utilities to be split between three departments, we created a bank rule to create a new transaction; when a bank feed transaction includes “PG&E” to create a split transaction allocating specific percentages to the various departments. It would take a lot of effort to code these split transactions manually but with Xero bank rules all we need to do is click on OK.
What if the Spend Money bank rule does not work?
Some of our clients handle the the day-to-day transactions in Xero including doing the reconciliations. We include in our one-on-one training sessions with them how to create bank rules, but oftentimes they find that the bank rules they create do not always work.
If you have created bank rules that do not always work, you may find modifying one or more of these areas of your Spend Money bank rule to help:
Choose Any rather than All for 1. When money spent on the bank statement matches ____ of the following conditions.
Choose Any text field and contains when entering the condition or conditions.
Enter a contact name in the box after 2. Set the contact… The contact will be an existing or new contact.
Enter an Account and Tax Rate under 4. With the remainder, allocate items in the following ratios…
Choose all bank accounts for 6. Target a bank account… Run the rule on.
Name the bank rule after 8. Give the rule a title...
Using bank rules in Xero can make your life easier! It may take a bit of work to initially set the bank rules up, but once they have been created and you start using them, you will love them because they will save you a lot of time and your account coding will be consistent!
Find out more about using bank rules to automate reconciliation in Xero with this short video.
Cindy Hovig
Author Bio: Cindy Hovig is the founder and Owner of Beyond Balanced Books Inc., a modern bookkeeping firm specializing in working with service based businesses. As an early adopter of cloud accounting, Cindy champions cloud accounting applications because she has seen how such applications can transform small businesses. Her firm, Beyond Balanced Books Inc. was awarded Xero Bookkeeping Partner of the Year in 2016 and received the Xero Partnership Impact award in 2017. Follow her on Twitter: @cindy_hovig.