If you’re a small business owner or accountant who’s just diving into Xero, you’re in for a treat. One of the platform’s most magical time-saving features is its automated bank feeds and bank rules. These tools can take your bookkeeping from “Ugh, I’ll get to it later” to “Done in five minutes flat.”
In this guide, we’ll walk you through everything you need to know—from connecting your bank accounts to building smart, reusable rules—so you can spend less time on tedious data entry and more time growing your business.
What Are Bank Feeds and Why Do They Matter?
Bank feeds are secure, automated connections between your bank and Xero. Each day, your transactions flow straight into Xero without you having to lift a finger (or download a single CSV file). No more digging through statements or manually entering payments.
Why bank feeds rock:
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Less manual entry = fewer errors
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Real-time view of your cash position
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Faster, smoother bank reconciliation
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Time savings that actually add up
Seriously—this one feature alone can save you hours every week.
How to Set Up Bank Feeds in Xero
Ready to link your bank? Here’s how to do it step-by-step:
1. Go to the Banking Menu
From your Xero dashboard, click “Accounting” in the top menu, then select “Bank Accounts.”
2. Add a Bank Account
Click “Add Bank Account” and search for your bank by name. When it appears in the dropdown, select it.
3. Choose Your Connection Type
Enter your bank name in the search field (1) and then click on the bank name (2). If you work with a smaller, regional bank or prefer to upload data on your own (less common), choose to add your bank without a bank feed (3).
4. Enter Your Online Banking Credentials
Don’t panic—Xero uses bank-level encryption and never stores your login credentials. It’s as safe as online banking gets.
Enter your bank log in (1) or choose to add the log in later (2) – if you choose to add later, you will need upload data manually for now.
5. Select Accounts to Connect
Have multiple accounts at the same bank? You can pick and choose which ones to sync. If you plan on adding more accounts later, you can choose to automatically sync any new bank accounts in – this is very handy option!
6. Let the Magic Happen
Once connected, it may take 1–2 business days for transactions to start importing. After that, it’s smooth sailing.
What Are Bank Rules in Xero?
Bank rules are where automation truly shines. Think of them as your digital bookkeeping assistant—working behind the scenes to classify and code your transactions exactly how you want.
Instead of manually categorizing the same kinds of expenses every month (
looking at you, software subscriptions), you can build a rule once and let Xero do the rest.
Why You’ll Love Bank Rules:
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Consistent categorization = better reporting
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Automates recurring transactions
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Reduces human error
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Saves loads of time during reconciliation
How to Create Smart Bank Rules in Xero
Creating bank rules in Xero doesn’t just save you time—it gives you consistency, clarity, and confidence in your financial reporting. Whether you’re managing recurring transactions or complex allocations, these rules can take the heavy lifting out of your daily bookkeeping.
Here’s how to create a rule that works like magic:
1. Navigate to Bank Rules
Go to Accounting > Bank Accounts, then click “Bank Rules.”
Or Click into the relevant bank account and find a transaction that should have a rule. Then:
2. Create a New Rule
Choose the rule type: Spend Money, Receive Money, or Transfer Money and then click “Create Rule”
Set Matching Conditions
1-4. Choose how to apply the rule
Select if ANY condition matches (more broad) or if ALL conditions must match (more restrictive).
You may want “All conditions match” if you need to create an “if AND” bank rule – such as If the payee = NAME and the amount = $.
For example, if all Apple purchases over $2500 are always Fixed Assets.
Important: if you are creating the bank rule from the bank feed, clean up the vendor name to remove any unnecessary information. For example, if a vendor comes through as “ZOOM.COM 888-799-966SAN JOSE CA”, you may only want to use Zoom.com so the bank rule will work.
5-6. Select the Contact
This is who you are spending money with or receiving money from. This may be new contact or someone you already work with. Begin searching for any existing contacts. If a match exists, select that. If not, click “Create” and create a new contact.
7-8. Allocate Line Items
You can split the transaction between one or more accounts, if needed. Select the account and choose a tracking category, if applicable.
9. Set the Reference
Typically we let the bank feed reference do it’s thing, but YMMV. Look at how your bank feeds data into Xero to choose the best option for you: Reference, Description, Analysis Code, Check Number, or choose to set it on your own (slower).
10-11. Choose Where to Run the Rule & Name the Rule
If the rule is universally applicable, choose to run the rule on all accounts or select which bank account to run it on.
We name our rules the same way each time: Vendor – Chart of Account, for example Starbucks – Meals and Entertainment. This helps us to quickly find rules later.
12. Save and Let It Work
Click “Save”, and Xero will start applying this rule automatically going forward.
Best Practices for Bank Feeds and Rules
Want to get the most out of Xero’s automation? Here’s how:
Start with Recurring Transactions
Set up rules for things you see every month—rent, utilities, software, internet, subscriptions. These are easy wins.
Use Specific Conditions
Avoid vague rules like “Name contains ‘Inc.’” and go for precision. Think: Name contains “Gusto” AND Amount = $365.00
Review Your Reconciliation Weekly
Automation isn’t a set-it-and-forget-it thing. Always keep an eye out for outliers or anything that got miscategorized.
Update Rules as You Grow
Vendors change, new expenses pop up, and your chart of accounts evolves. Adjust your rules to keep everything clean.
Use Rules for Large One-Offs Too
Even if it’s a one-time payment (like a security deposit with multiple line items), a rule can help allocate amounts properly and track categories accurately.
Troubleshooting Common Issues
Bank Feed Disconnected?
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Go to Banking > Bank Accounts
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Select the account
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Follow any prompts to reconnect
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Reauthorize your credentials if needed
Rule Not Working?
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Double-check that the rule is active
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Confirm your conditions match the transaction exactly (watch for typos or extra spaces!)
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Check that no higher-priority rule is overriding it
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Review if the transaction matches all conditions—one mismatch can stop it from applying
Wrapping Up: Automation Is Your New Best Friend
Setting up bank feeds and rules in Xero is one of the smartest moves you can make for your business. These automations don’t just save you time—they give you cleaner books, faster reporting, and fewer headaches come month-end or tax time.
Start simple, stay consistent, and keep tweaking as you go. Before you know it, you’ll have a bookkeeping system that practically runs itself—leaving you free to focus on the stuff that really matters.
Need help making sure your Xero setup is fully optimized? We’re here to guide you every step of the way.
