Xero in on Xero
One of the first things we teach employees new to Accountingprose is how to create bank rules for our clients’ files. Creating and using bank rules in Xero is one of the easiest ways to automate our work, freeing up time so that we can focus on higher level, advisory work which makes the biggest impact on their bottom line. However, one of the things that trips most newbies up is creating bank rules that are broad enough to catch a sufficient amount of transactions to automate. If you can master bank rule creation, you can breeze though bank reconciliations in a snap.
In order to create effective bank rules, you should first understand the structure of bank rules. Spend Money Bank Rules are broken into 8 sections: Conditions, Contact, Fixed Value Allocation, Remainder Allocation, Reference, Bank Account, and Title.
Conditions: In this section, you have the option of applying a bank rule if “Any” or “All” conditions are met and to include conditions for the Payee, Reference, Description, Amount, Analysis Code, and Any Text Field.
If you want a bank rule that is very broad, you would choose “Any,” and if you would like a very narrow bank rule, you would choose “All.”
You will also set the conditions for the transaction, and if you arrive at a bank rule by clicking through a transaction in Xero, the information from the transaction will be pre populated in the proposed bank rule.
In this example, we are looking at a purchase from Chevron, where a client goes to purchase gas for their fleet vehicles.
As you can see, Xero automatically brought in Payee and Reference information, which will help us to set the Spend Money Bank Rule faster.
You will notice that the reference in this bank rules has brought over the following details “CHEVRON 0308072/CHEVREDMOND WA 00308072 72 SERVICE STN.” If we would leave everything as is, Xero would read this as “When the Payee is Blank AND the Reference is CHEVRON 0308072/CHEVREDMOND WA 00308072 72 SERVICE STN” to apply this rule. However, once any of these conditions aren’t met, the bank rule will no longer work. Let’s pretend that our client goes to many different Chevron gas stations around town as they go about their normal work day. Each Chevron station would have a slightly different reference code. If we were to keep everything as is on this bank rule, then this bank rule would only be applied at one Chevron station.
In order to make this broad enough, we will change the bank rule to read:
When money spent on the bank statement matches ANY of the following conditions…
Remove payee condition
Any text field: contains: Chevron
By switching this up slightly, we will now be able to pick up any transaction that has the word Chevron in the transaction. This means they can go to any Chevron station across the planet, and as long as Chevron appears somewhere on the transaction, this bank rule will work.
This is what the first section of the Spend Money Bank Rule looks like now:
Contact: We will next want to set the contact as “Chevron” regardless of how the contact gets pulled into Xero. There is no need to add the reference details after the business name as they are irrelevant to the contact.
Fixed Value Allocation: We would only need to fill this field out if we want to apply a specific amount of the total to a particular expense or cost of goods sold account. Since fuel costs are variable, we can leave this section blank.
Remainder Allocation: If you had used a Fixed Value Allocation, the amount that is fixed will automatically go to the account you specified and the remainder of the transactions will be allocated here. In this case, we will use this field to target which account we want to code this transaction to.
It is important to note that you can add as many line items as you need and break the expense down by percentage. So for example, if you want to split the cost 50% into one category and 50% in another, you do this here. You can also use this to split the expense by tracking category.
Reference: In order to pull in the transaction reference details properly, you will want to review how the bank transaction came into the file originally. In this case, the reference details came in on the reference line. So we will want to let Xero know this is where that information can be found.
Bank Account: Let’s pretend that your client goes to Chevron and uses many different bank and credit card accounts to pay for the transaction. If you were to keep this transaction as is, you would only run the rule if this transaction were to hit the American Express account.
We actually want this rule to run on every account in the file, even if we add new accounts to Xero. So we will change this selection to run this rule on “all bank accounts.”
Title: The last step in creating a great bank rule is to give it a title that would make sense to anyone working in the file. This transaction auto populates the name of the rule based on what we set the contact to. In this case, this rule would be saved as “Chevron.” However, we want it to provide a bit more detail, so we are going to change this to the <Name of the Vendor> - <Chart of Accounts Name>. In this example, we would name this rule “Chevron - Parking & Auto Expenses.”
When you are done, the final rule will read:
If ANY text fields contain the word CHEVRON enter 100% of this transaction to PARKING & AUTO EXPENSE, set the reference to the information in the reference field. This rule should be applied to all bank and credit card accounts in the file and the rule will read “Chevron- Parking & Auto Expenses” on the bank transaction to match.
Once your bank rule is set, you can use this rule to code transactions one-by-one via the bank reconciliation screen, or you can hop over to the cash coding section and check all of the transactions and reconcile them all at once. We definitely recommend using cash coding to quickly reconcile hundreds, if not thousands, of transaction at the same time. This hack will help you quickly move through your clients data entry and will free up time to do work that brings more value to the table.
XPT (Xero Pro Tip): Set up broad enough bank rules, so that you can cash code your files in a breeze.
Cristina Garza
Author Bio: Cristina Garza, owner of Accountingprose, thrives on accounting automation and loves helping her accountants spend less time managing the data entry and more time advising our clients so that they can be more successful. She views every client relationship as a partnership, which means that investing time into helping her clients grow means that Accountingprose grows in tandem.
When she isn’t busy working, she can be found at a music festival dancing until dawn or hanging out with her family on the side of a mountain. Cristina is built for Colorado.