Bank reconciliation has always be a laborious task, especially where there are several transactions each day. Ticking off each and every transaction can be tedious and time consuming.
Luckily Xero has a couple of tools that will speed up and automate the bank reconciliation process, freeing up your time to focus on other areas of running your business.
We have already discussed the basic features of bank reconciliation within Xero bookkeepers, so you should already be familiar with the way Xero makes reconciliation simple. But today we will look at two special features – bank rules and cash coding, which can really save time where you have the same transactions recurring on a regular basis.
On the reconciliation screen, above the left hand side amount received, there is the option ‘Create Rule’. If you tick this you will go through to the Create Rule page. Depending on whether you are receiving or spending money the rule will be for ‘Receive Money’ or ‘Spend Money’. You now have seven steps to create the rule.
Set the conditions that must be met for the rule to apply. This could be any or all of any number of conditions. Choose, from the drop down menu, which conditions you want and how you want them to apply. Delete or add conditions until you have set the exact conditions required.
Set the contact. If you choose ‘an existing or new contact’ you will be required to enter the contact’s name in the box. If it is an existing contact, make sure it matches with the existing client name – it should appear in the auto fill options. If you choose the payee from the bank or to enter the contact during reconciliation the box will disappear.
Set a fixed amount to an account. To do this add a new line, fill out the description and set the account and amount applicable.
With the remainder, you can apply it in section 4. Note that if the amount is not fixed (e.g., a varying direct debit) it is better to skip section 3 and just apply the whole amount in section 4.
Set the reference. This is useful if you don’t want to use the reference provided by the bank. You can instead use the cheque number, the payee or your own description. This allows you to make the reference more relevant to you, your team and your bookkeeper.
Target a bank account. By default this will be to the bank account you were reconciling when you clicked ‘Create rule’. 99% of the time you want to keep this in that account, but if you need to change it you can do here.
Give the rule a title so you can easily find the rule from the list of bank rules in case you need to edit.
Once you have completed these steps, click Save to create the rule.
If you want to find the existing bank rules, click Accounts – Bank Accounts – Bank Rules. Then select whether you want Spend Money Rules or Receive Money Rules and choose the relevant rule from the list.
Once a rule has been saved, when you click on Reconcile, Xero bookkeeping will automatically code the transactions as you described. Therefore, all you have to do is click OK and the transaction will be reconciled. If you don’t want to apply the rule, just click ‘Don’t apply rule.’ You can then manually enter the transaction details.
Cash coding is a super fast way of clearing masses of repeating data. Let’s say, for example, you sell widgets on eBay. These widgets only cost $1 apiece and you sell hundreds per week. Each time you make a sale you have to pay eBay a selling fee of $0.10.
Do you really want to click off each transaction one by one? Not when you can do cash coding, you don’t.
Cash coding looks like a big spreadsheet. You can select multiple items at a time – just hold down Shift, then use the cursor to move down and select all the repeating items. Once everything is selected, you only have to fill in the details on one of the selected items and all the other highlighted items will be coded the same. In this way you can reconcile hundreds of transactions in seconds, saving you heaps of time. You’re welcome.