How To Create Bank Rules In Xero
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Under this method you simply code what comes through your bank account. If on both but for different balances then you probably need to change Xero to agree with the bank statement. I have previously written about the most common bank reconciliation errors in Xero, which is a good primer for understanding the items listed on your Reconciliation Report. This article is specifically dealing with the scenario where your “Statement Balance” in Xero does not agree with your actual bank statement. I’ll warn you now – this can be technical and complicated. Novice users should not play around in most of these areas. If you identify that you have problems PLEASE get a Xero Certified Advisor to help you fix it.
The two main transactions are ‘Spend Money‘ and ‘Receive Money‘. Using the bank reconciliation you simply create these transactions as they come in. Our bank rec remembers how things were last coded. Compare the opening statement balance in the Xero report to the opening statement balance on your bank statement. If they are not the same go back one month at a time until you find a period where they agree.
I’ll update this after the “Catch Me Up” is done and the next time I stop everything to sit down and screw with the books. Xero is unique in that it provides both the Cash and Accrual view of your transactions. Under the Accrual view you see where your accounts are based on what has been invoiced. The Cash view allows you to see the actual cash movements. You’ll soon learn that timing matters a lot for small business cash flow.
Tax Rate -Xero’s default for this field is the tax rate assigned to the account you’ve chosen for your line item. You can change this by selecting another tax rate from the drop-down menu.Edit account to change the default tax rate applied to your chosen account. Unit Price -You can enter positive, negative or zero amounts but the overall Spend Money transaction can’t be negative. Leave this field as 1.00 if your Spend Money transaction is for only one item such as bank fees.
If you have good records about every bill ever received from a supplier, then you can easily access information about payments made or credit notes applied. If a supplier ever tries to chase you for payment of a bill they claim hasn’t been paid, you can quickly defend yourself. You can save yourself a huge amount of time down the track by having this information easily accessible. Ever wondered if there’s a better way to manage staying on top of supplier bills? Carmen Morris discusses entering expenses as Bills in Xero and the benefits this offers.
If there and not reconciled you should mark it as reconciled. If not there you should create it and mark it as reconciled. Balance in Xero – this is the accounting ledger balance. It is the sum total of all the debits and credits recorded in the bank account in Xero, whether reconciled to the bank statement or not. By entering Bills, the Profit & Loss report will show the expense on the day that it was incurred, not when it was paid. You can be deceived into thinking that things aren’t as bad as they really are. Secondly, tax deductions can legally be claimed sooner.
Open in invoice/bill and see the payment history beneath the total. If you can find the erroneous payment you should consider using “remove and redo” on the payment which will free up the invoice/bill for allocation again. Once batch payments are in use, suppliers can receive remittances at the click of a button. They’ll receive something that looks like a statement showing a list of bills paid and the date that you have paid.
And there’s no easy way to determine what deposits or checks or service fees you might have neglected to record. Now go through the transactions for that day and compare the Xero bank statement report against the actual bank statement. You are looking for transactions on one side that are not on the other, or transactions where the amounts differ . If it is on the bank statement but not in Xero – check to see if it is in the transaction list . If it is there with a different date and is manually reconciled you may want to change the date so that it matches up with the bank statement.
There are probably few financial processes that you loathe more than manual account reconciliation. Matching transactions in the checkbook register to the printed bank statement isn’t so difficult, but the ending balances never seem to match.
Spend & Receive Money
At this point I would have two transactions for the same expense, my expenses would be overstated on my Profit & Loss report and I’d have a Bill sitting in my Awaiting Payments tab that was in fact already paid. When we receive money and it is allocated to a customer where no customer invoice is generated, it would be very good if we are able to see this receipt in the customer ledger. Currently, if I reconcile these using Spend Money, instead of going into my ‘suppliers’ and creating a bill, then the transactions won’t show on a report if I pull up all transactions for a supplier. There are times when I use ‘Spend money’ or ‘Receive money’ to reconcile transactions, for example if there are Bank Charges paid. Xero displays transactions for which there wasn’t an automatic match and lets you select one or more. Sometimes Xero won’t automatically make a match because the amount that came in from the bank combined two transactions in Xero.
If you want to see more information about a particular transaction, drill into the line to open up a detailed view of that transaction. This will give you an Options drop down where you can remove and redo the transaction or you can reconcile or you can reconcile or unreconciled the transaction as needed. If you want to remove and redo a transaction, simply clock the box alongside the account transaction and select “Remove & Redo”. Select this and now you can search for your transaction by either the description or contact name, an amount or the date. You should make sure that you periodically check the Suspense account to ensure that your Invoice payments match the Bill payments (or your accountant will have extra work to do at year-end). Sign up now and we’ll get you up to speed with Xero – simple and intuitive cloud accounting software.
But the reality is that this does not always happen. To set this up you need to create a new bank account in Xero. It doesn’t matter what bank or account number you say the account is with as you will not be setting up bank feeds (you can just enter “Petty Cash” as both the bank name, account name and the bank account number). This is the most comprehensive method but also gives the best visibility and is bookkeeping more likely to get sales tax transactions appearing in the correct period on the sales tax reports. The Xero web site also has some guidance on this. Xero has a “secret” transaction type (two – in fact) that many users aren’t aware of, and those that do often mis-use. These transaction types are actually variations of the standard Spend/Receive Money bank transaction but they have very unique treatments.
If you are uncomfortable about any part of the process, or not sure you are doing the right thing, please don’t hesitate to contact us. Clients on a monthly fee plan are covered by our “no fee 10 minute rule” for fixing up small problems. Otherwise we will charge you a reasonable fee for the expertise we provide to help you keep you ledger up to date. Easy Description- some descriptions are really long when looking at the bank lines.
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If a transaction is a Spend or Receive Money item, you will be able to edit the transaction itself. Depending on the type of transaction, you may also be able to copy the transaction or send a adjusting entries remittance from the Options dropdown button. The transaction is now waiting in the Reconcile tab for you to redo. Check the box alongside the transaction and select the More dropdown button.
If your bank feed includes a balance then the report may also say “Imported Statement Balance” and if this is not the same as the “Statement Balance” it will show you a “Balance out by” error amount. One of the beautiful things about accounting software is the ability to enter the banking details against the supplier contact.
If a statement balance is not available for that ending date Xero does not display this line on the Reconciliation Report. Now your Xero account balance should agree with your physical cash. The Spend Money and Receive Money options in Xero can be used to record cash transactions. As you can see, the Prepayment type is far more complicated. It is specifically designed to manage the Sales Tax implications of receiving funds as many jurisdictions treat the movement of cash as the trigger for recognising sales tax liability .
The Benefits Of Entering Expenses As Bills Instead Of Spend Money Transactions
Overpayments are ideally suited for recording those times when your customer pays you twice, and you will hold the funds to be applied against a future invoice. You can not change the coding or tax treatment in any way. No revenue will be recorded, your Accounts Receivable balance will reflect that you owe the money to the customer, and the payment will show up as a single line on the customer statement. When using a Prepayment you need to specify a ledger code. When you create a Spend/Receive Money transaction and attach a contact to the Who field, it does not show up in the Sales or Purchases screens and therefore has no impact on the Customer or Supplier Balance. Overpayment and Prepayments do have an impact on the Customer/Supplier account – but each in completely different ways. They have the same performance whether Spend or Receive Money – but will impact Supplier accounts/Bill or Customer accounts/Invoices respectively.
You are likely to need more than one line in the transaction so you will need to click “Add Details” to get to the full screen. You should enter each disbursement or receipt as a separate line and code them appropriately.
- The Cash view allows you to see the actual cash movements.
- A good accounting system makes it possible to easily manage all your financial resources – even petty cash.
- The transaction amounts are slightly off so Xero can’t find a match.
- Here is what you need to know about the main balances.
Start with the oldest date that you know there was a problem. Generate a Reconciliation Report in Xero for the account, switch to the Bank Statement tab and ensure that the date range covers the same date range as the statement you have . Missing Spend And Receive Money Transactions In Xero Bank Statement Lines – after bank feed starts – this is somewhat common with Yodlee feeds, unfortunately, and also very hard to find. The only option is to compare your Xero generated statement to the physical statement – see below.
As with the rest of Xero’s reconciliation tools, please let us help you through the first few times. Xero’s reconciliation tools only work if you’re able to download and import your bank statements or — even better — set up a direct connection with your financial institution.
Create or enhance bills, invoices, or spend/receive money transactions. Assign accounts and/or items to line items that match what you bought or sold. Track categories, assign sales/purchase taxes, as well as contacts.
If you enter a name that’s not already a contact, Xero adds it to your contacts.When you type a name that isn’t in your list recording transactions of contacts, NEW appears in the To field. It’s a great place to find items that you might have duplicated by mistake.
If you are just using Spend Money and Receive Money I urge you to check out Invoicing with Accounts Receivable and Accounts Payable. Now that you have a safe starting point, jump forward one week at a time until you find the point that they are no longer in balance. Go back daily until you find the last day where it balanced. You have now identified the day where there is a problem. Create a Manual Journal (if Xero expects less than there is you would credit Petty Cash; if Xero expects more than there is you would debit Petty Cash) to record the difference. I usually code the other leg to General Expenses – but if the amount is large then you have probably missed a transaction or two.
By having more expenses in the current financial year, the business can declare less profit and therefore needs to pay less tax. Over the long run it makes no difference to the total amount of tax paid, but it’s worth remembering that a dollar today is worth more than a dollar a year from now. The disadvantage of entering Spend Money transactions is that most people rarely enter the supplier bill number, largely because this is absent from the bank feed window unless you click a few more buttons. Also, if you’re paying multiple invoices at once, you can’t enter a single, unique reference number. Entering each individual supplier bill as a Bill in Xero will prevent you from entering a duplicate, as Xero will warn you if you attempt to enter the same bill number twice. Just be mindful that if you have multiple people entering bills in your business that everyone enters them the same way.
Two ways to enter both income and expense in Xero. Assign expenses to a customer -For each item that you want to recover, enter and select the customer’s name.