Managing Bank Accounts in Xero

Step-by-step guide to managing bank accounts in Xero

1. Add a Bank Account

   • Go to Accounting > Bank accounts.
   • Click Add Bank Account.
   • Search for your bank name or select Add it anyway if it’s not listed.
   • Enter details:
     • Account name (e.g., Business Checking)
     • Account type (checking, savings, credit card, PayPal, loan, etc.)
     • Account number/IBAN
   • Save.

2. Set Up Bank Feeds

   • If your bank supports direct feeds:
     • Connect directly to Xero for automatic daily imports.
   • If not supported:
   • Use a third-party feed (Yodlee), or
   • Import statements manually via CSV/OFX/QIF files.

3. Import Bank Statements (Manual Option)

   • Download statement files from your bank.
   • Go to Accounting > Bank accounts > Manage Account > Import a Statement.
   • Upload the file.
   • Review imported transactions.

4. Reconcile Transactions

   • Go to Dashboard > Reconcile.
   • Match bank statement lines with:
     • Invoices (money received).
     • Bills (money spent).
     • Manual journals or transfers.
   • Use “Create” when the transaction doesn’t yet exist in Xero.
   • Use bank rules for recurring items (e.g., utilities, subscriptions).

5. Manage Bank Rules

   • Set up rules under Bank accounts > Bank rules.
   • Define conditions (e.g., if description contains “Spotify,” allocate to Entertainment Expense).
   • Saves time on repeat reconciliations.

6. Handle Transfers

   • If moving money between accounts:
     • In reconciliation, select Transfer and choose the matching account.
     • This ensures both accounts reflect the movement correctly.

7. Monitor Bank Balances

   • Compare Xero balance vs. bank statement balance on the dashboard.
   • Investigate differences (often caused by missing or duplicate transactions).

8. Reporting & Review

   • Use Bank Summary and Cash Summary reports to check balances.
   • Run Bank Reconciliation Summary to confirm everything is matched.

Managing bank accounts in Xero is more than just connecting a bank feed. The advanced features give you automation, control, and real-time insights. Here’s a detailed breakdown:

Advanced Features of Managing Bank Accounts in Xero

Bank Feeds & Real-Time Sync

• Connect accounts directly via secure feeds (or Yodlee if direct feed unavailable).
• Some banks allow real-time syncing for up-to-date balances.
• Multiple bank accounts, credit cards, and PayPal can all be linked.

Bank Rules for Automation

• Create spend/receive rules that auto-allocate transactions to accounts.
• Example: "Amazon" transactions → Office Supplies expense.
• Reduces manual coding and improves consistency.

Cash Coding for Bulk Reconciliation

• Reconcile hundreds of small transactions (like POS or PayPal feeds) in bulk.
• Apply rules and coding quickly in a spreadsheet-style interface.
• Saves hours compared to line-by-line reconciliation.

Bank Transfers & Multi-Account Management

• Easily record transfers between accounts (e.g., Current → Savings).
• Xero auto-suggests transfers when it detects matching entries.
• Supports multiple accounts in different currencies.

Multi-Currency Banking

• Set up accounts in foreign currencies.
• Automatic conversion at daily exchange rates.
• Unrealized and realized FX gains/losses tracked automatically.

Cash Flow Forecasting

• Bank balance integrates into Short-term Cash Flow tool.
• See projected balances based on unpaid invoices, bills, and expected payments.
• Helps with liquidity planning.

Bank Reconciliation Matching

• AI-driven matching suggests invoice/bill payments for bank transactions.
• Auto-matches recurring transactions (e.g., subscriptions, rent).
• Manual adjustments possible for partial payments or split transactions.

Custom Bank Rules for Splits

• Transactions can be split across multiple accounts.
• Example: Fuel bill split into “Motor Vehicle Expenses” + “GST Input Tax Credit.”

Attachments & Audit Trail

• Attach bank statements, receipts, or notes to reconciliation lines.
• Creates a full audit trail for accountants and auditors.

Direct Bank Payments (Add-ons)

• In some regions, pay suppliers directly from Xero via bank integration.
• Supports batch payments and ABA/SEPA file exports for bulk uploads.

Bank Account Locking

• Lock reconciled bank accounts for past periods.
• Prevents accidental changes to closed transactions.

Reporting & Analysis

• Run Bank Reconciliation Summary & Exceptions Reports to detect errors.
• Compare actual bank balances vs. Xero balances.
• Monitor cash inflows/outflows trends across multiple accounts.

Tip: The real power comes from combining bank feeds + rules + cash coding — once properly set, 80–90% of reconciliations can be automated, leaving you only exceptions to review.