Setting Up & Using Bank Rules in Xero.

What are bank rules?

If you do your own bookkeeping, save yourself time by setting up "bank rules" so Xero automatically recognised transactions in your bank feed and suggests the allocation so you can reconcile with one click.

This works best for items you won't have documents for (invoices/bills):

? - Regular/Recurring DD. If you have a subscription that comes out routinely you may not have a bill every month to upload. Set up a bank rule for these to save you time.

? - Transfers made to you/your staff for salaries.

? - Payments to HMRC for taxes and VAT.

? - Transfer between accounts e.g. main business bank to you tax/VAT savings account (yes you should have one of these).

? - Bank fees paid/Bank interest received.

? - Grant income/furlough received.

Here's how set up bank rules:

From your dashboard click into the Accounting tab, then Bank Accounts. The following screen will then load:

Select the "Bank Rules" button followed by "Create Rule" on the top right. You will also be able to see and amend all current bank rules here.

You will need to decide what sort of bank rule you need to set up:

• Spend Money Rules are from expenses that you don't receive bills for e.g. DDs, transfer for salaries, HMRC taxes/VAT, Bank Fees etc
• Receive Money Rules are for income you don't invoice for e.g. Bank interest received, furlough/grants income etc
• Transfer Money Rules are for transfer between your own accounts e.g. moving money from your main bank to you business savings account.

Setting up the rule:

Now you have decided what rule you need to set up, you'll need to populate the fields so Xero accurately recognises and records the transaction.

1. In field 1 enter the detail that's shown in the bank statement line exactly e.g. BG1074585. Xero will then learn to recognise this reference when new bank lines appear.
2. Select the account it applies to e.g. British Gas or in the case of a transfer, select the bank account the transfer is made to.
3. Enter a description, account e.g, Heat, Light and Power, Tax Rate e.g. 20% VAT on Expenses and percentage allocation e.g. 100% - You may wish to split the allocation to multiple accounts. Simply change the percentage and add another line for the remainder.
4. Chose which bank accounts to target with the rule (or leave it targeting all accounts).
5. Name the rule with a title e.g. British Gas DD
6. Click "Save".

Now when you're going through your bank reconciliations these bank rules will automatically recognise the transaction and allow for one click posting saving you lots of time and effort!

TIP: Regularly review your bank rules. It's key to ensure they are not outdated and being posted with the incorrect VAT treatment or to the wrong account as the service or product being provided changes.