Setting Up Xero Bank Feeds – Performance Accountancy

The next stage of setting up Xero is to look at the bank feed. This might be a feed from a UK bank account in GBP, or it might be a GBP credit card account. However, if you are using Xero Simple or Xero Ignite, you can only connect GBP bank accounts. Foreign currency bank accounts, such as euro or US dollar accounts, are only available in the more comprehensive Xero plans.

Some banks do not have a straightforward direct feed into accounting software. The Co-operative Bank is one example where you may need to complete a form and send it to the bank before the feed can be approved and activated. Metro Bank and Co-op are two of the more common examples where extra steps may be needed. Most banks, however, use open banking and can be linked directly to Xero.

To start, go into Xero and open your demo account. Click Accounting, then Bank accounts. If this is the first bank account you are adding, Xero will tell you that there are no bank accounts to show. That is fine. Click Next and then select your bank.

Xero will show a list of commonly used banks, which are often the banks most frequently being connected at that time. You can choose one from the list, or you can search for your own bank. For example, if you have a Barclays personal account rather than a Barclays business account, you can search for the correct version of Barclays. The same applies to other banks.

When you select a bank, Xero will take you through the secure connection process. In the example shown in the video, Xero uses a connection service called Tink to create the link between Xero and the bank. You will need your normal online banking login details, and you may also need your account number, sort code and your usual security method for accessing the bank.

Once you click to continue and log into your bank account, you follow the secure online process. This is similar to logging into online banking normally, but with the extra step of authorising the connection between your bank and Xero. This creates the digital handshake that allows bank transactions to flow into Xero.

You do not have to use a live bank feed. That may sound odd, but there are situations where there is no bank feed, where you do not want to connect it immediately, or where you need to bring the information in another way. You can still create a bank account in Xero without connecting a feed straight away.

To do this, choose the option to add an account without a bank feed. Enter the bank account details. In the video example, I used a test bank account with dummy Barclays-style details. Some people use zeros for the sort code and account number where there is no real bank account involved, but I tend to reserve that for things like petty cash.

Petty cash can be useful if you occasionally buy something from your own pocket, rather than through the business bank account or credit card. Setting up a separate petty cash account in Xero can help keep a record of those items.

Once the account details have been added, Xero confirms that the account has been created. You can then either add another account, continue to set up a bank feed, or return to the dashboard.

If you do not have a bank feed, or if you need to bring in transactions manually, you can import a bank statement. From the bank account, choose Manage Account and then Import a bank statement. Xero will guide you towards preparing a file to import.

The file will usually be a CSV file. Some banking apps allow you to download a CSV file directly. If yours does not, you may be able to download PDF statements and send them to us. We can use software to convert the bank statements into an Excel file or Xero-ready format, but the software charges us by the page. If you ask us to do that conversion, we will charge the relevant fee, currently £1 per page plus VAT.

Xero allows you to download a CSV template so that your bank data can be copied into the correct format. I had already prepared a statement import template for the demonstration. The important columns are the date, description and amount. You can also include a reference number and a payee if you want to.

When entering the amount, anything leaving the bank account needs to have a minus sign in front of it. Anything coming into the bank account should be entered as a positive number, without a symbol in front of it.

Once the CSV file has been selected, Xero asks you to map the columns. It compares the headings in your CSV file with the transaction date, amount and description fields in Xero. Check carefully that each column is being sent to the right place before confirming.

Xero then gives you a preview of the transactions it is about to import. In the video example, the preview showed rental income received by standing order. This preview stage is useful because it lets you check the data before it enters the bank account in Xero.

If Xero finds a problem, it will flag it before completing the import. In the demonstration, I deliberately included a line with no transaction amount. Xero correctly rejected that line because a transaction with no value cannot be imported. A genuine bank statement is unlikely to include a zero-value transaction, but this shows how Xero handles errors.

Once any errors are removed, you can complete the import. The bank account will then show the imported transactions, ready to be reconciled.

That is the basic process for setting up a bank account in Xero, either with a live bank feed or by importing statement data manually. The same manual import process can be useful for certain credit cards that do not have a direct feed. For example, some NewDay credit cards do not connect automatically, so the transactions need to be imported instead.

Once the bank account is set up and the transactions are in Xero, the next step is to reconcile the bank account. If you have problems with the setup or import process, please contact us and we can help you work out the best way to get the information into Xero.