Xero in on Xero
Following up on some thoughts from last week's thread, another piece of the advisory puzzle is being able to provide timely and accurate financials. In the past, a primary roadblock for this was the bank reconciliation process - there was just no way to verify that all transactions were captured, other than waiting for the monthly statement to come in from the bank, then ticking and tying every transaction.
Bank feeds are the solution to this challenge. Essentially producing a mini reconciliation every day, Xero can be connected to a bank so that every night the transactions that were processed that day are pulled into the software. They can be matched against existing transactions that have already been entered into Xero, or you can manually code the transaction as appropriate. And when you’re done, you can quickly view a report to verify that the new balance reconciles correctly to the bank - all on a daily basis. Now that’s timely information!
There are two types of automated feeds available in Xero - direct and Yodlee. Direct feeds are built out by Xero and the bank itself; and tend to be in place with the larger national banks. Yodlee feeds are provided via the service of a third-party software provider and are seen more with local and regional banks. From the user side, there isn’t much difference - for the advisor, the type will sometime determine who to contact for assistance in troubleshooting.
One common misconception worth mentioning is that the bank feeds do not automatically create transactions in Xero. They are just a tool to help reconcile quickly and accurately. Clients often misunderstand this and can be confused by information appearing on the left side of the matching screen, but not in the financial reports.
Most problems with bank feeds can be solved by simply re-entering the login information. Go to the menu inside the bank account screen, select “Update login information,” then walk through the procedures. Sometimes you will need to completely disconnect/reconnect - if so, just make sure the new connection starts on the last day you received feed information and be on the lookout for potential duplicates.
For banks with 2-factor authentication or other types of additional security, it can be tricky to get the timing correct - make sure you have the client available or are able to directly receive any codes from the bank before starting. In rare cases, there may be feed setup issues on the bank side, such as not excluding transactions with a “pending” flag. In these cases, support from Xero/Yodlee/bank should be able to resolve the issue, but may take several interactions.
To set up a bank feed, first add a new bank account.
Then go to the bank feed screen, enter login credentials as appropriate for that bank, then start the feed. It’s that fast. For additional details or help with troubleshooting, refer to the bank feeds section of Xero Support.
Next week we will dive into more details on all the different ways to bring banking information into the Xero platform, beyond just the automated bank feeds.
XPT: It’s easy to overlook an existing transaction for matching, and directly code an item from the bank feed. Always review the reconciliation report for outstanding items that seem out of place. You can also scan the Account Transactions tab looking for items with an “Unreconciled” flag and verify there isn’t a different version of the same transaction in the surrounding 2-day window.
Dan Schmidt
Author Bio: Dan Schmidt is the CEO of The Emerging Business CFO, a virtual accounting and financial advisory firm that works to free founders and entrepreneurs from the stress of managing the daily operational grind. The company offers operational accounting, systems setup and fractional CFO services. Twitter: @ebcfo