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How to Manually Enter Bank/Credit Card Transactions in Xero (Spend/Receive Money)

How to Manually Enter Bank/Credit Card Transactions in Xero (Spend/Receive Money)


Welcome to the Fit Small Business
Xero training course. In this lesson we’re going to cover how to manually
enter bank and credit card transactions in Xero. To follow along with me, login to
your Xero account now or click the link below this video for a free 30-day trial
of Xero. You can also click this link to access a full Xero course and other
helpful resources. Let’s get started. As you learned in the previous lesson,
certain transactions must be entered into Xero prior to reconciling your bank and credit card accounts. For example
invoices and bills should be entered prior to reconciling so that you can
easily match them up with the corresponding deposit or check
transaction downloaded from your bank. In this lesson we’re going to cover
transactions that are not related to invoices or bills and thus can be
entered prior to or during the reconciliation process. These
transactions fall into one of three categories: spend money transactions,
receive money transactions, and bank transfers. Let’s discuss when to use each
transaction and how to record the transaction in Xero. In general, you
should use a spend money transaction to record money spent that is not related
to a bill, a bank transfer, or an expense claim. To learn how to manage
money spent to pay a bill or an expense claim, head over to the previous lesson:
How to Reconcile Downloaded Bank and Credit Card Transactions. You can click
here to access this lesson. Bank fees, payments made via check,
ATM withdrawals, and debit and credit card purchases, are just a few of the
types of transactions that should be entered as spend money in Xero. For
example if you use the company credit card to buy lunch for the office, this
would be a spend money transaction. However, if you used your personal credit
card, this would be an expense claim. You can click here to access our How to
Manage Expense Claims lesson. Let’s go ahead and enter a spend money transaction
into Xero. From the Xero dashboard you want to go ahead and click on the plus
sign here, right below your name, and then let’s go ahead and select spend
money. In the next screen you want to select the bank account that the money
was withdrawn from, and then click the next button. And here are the fields that
we need to complete to create a spend money transaction. In this first field we
need to let Xero know what type of spend money transaction we want to create. We
have the option to choose from direct payment, prepayment, or an overpayment.
A direct payment is a payment made for products or services that you received.
For example office supplies or in this example, parking fees. A prepayment is a
payment that you’ve made in advance of receiving goods or services that you’ve
purchased. For example a deposit made to secure a caterer for an office party would
be a prepayment. Xero allows you to apply the prepayment to a future bill, or treat
it as a refund if it is a refundable deposit. An overpayment: if you paid more
for products or services and you were supposed to, you can enter this
transaction and reconcile it to the refund or the credit note that you
received from your supplier. So we’ll go ahead and select a direct payment. In the
To field you want to go ahead and select the payee from the drop-down or add them
if you have not set them up in Xero. In the Date field you want to enter the
date of the transaction for the payment that was made. The Reference field is an
optional field. In this field you can enter a reference number or any
additional information that you’d like to. If the payment was made by check, you
could actually enter the check number in this field. And then you want to go ahead
and mark this box here that says Pay by check. Item: if the payment was made to
purchase an inventory item, select the item from the drop-down field. If you
have not set the item up in inventory, you can do so here by clicking the New
Item option here. The Description field will automatically populate if you did
select an item here in this field. Otherwise you can type a description
just so that you are aware of what this purchase was for. Enter the quantity of
items that you purchased in the Quantity field. If a service was
purchased, enter a quantity of 1 as we have done in this field. And then go
ahead and type in the Unit Price in the next field here. Account: select on the
drop-down the account that you want to categorize this expense to. To learn more
about accounts check out our How to Set up a Chart of Accounts lesson. You can click
here to access this lesson. Region: region is a type of tracking category. If
you want to track income and expenses by department, location, sales rep, or another
method, then you want to select the tracking category from the drop down
here. To learn more about how to set up tracking categories,
check out the Organization and Financial Settings lesson. You can click here to
access this lesson. The Amount field will automatically be populated by Xero by
taking the quantity column and multiplying it by the unit price that
you indicated. This icon up here allows you to attach a scanned copy of a
receipt or other documentation to support your transaction. Please note
that you can use Xero files to help you stay organized and prepared for tax
season. The Tax field: from the drop down you want to select the appropriate tax
rate if applicable. Check out our Sales Tax lesson to learn
more about how to set up a report and pay sales tax. You can click here to access
this lesson. If you purchased something for a customer, you can flag it as a
Billable Item here. Click this link to select the customer that should be
billed for this item later on. Last but not least don’t forget to save your work.
Once you have saved the transaction you should receive a notification similar to this
one here. Now let’s talk about receive money transactions. In general you should
use a receive money transaction to record cash, check, or other deposits not
related to an invoice, transfer, or refund. If you receive payment at the same time
that you make a sale to a customer, then you will also record a receive money
transaction. This is similar to recording a sales receipt in QuickBooks. To learn
how to manage money receipts for an invoice, transfer, or refund, head over to
our previous lesson: How to Reconcile Downloaded Bank and Credit card
Transactions. You can click here to access this lesson. Tax refunds customer
deposits, and interest earned, are just a few of the types of transactions that should
be treated as received money in Xero. Let’s go ahead and enter a receive money
transaction. Similar to the spend money transaction, you want to click on the
plus sign here again at the top and this time we’ll select receive money. We’ll go
ahead and select the bank account that we received the money or the deposit into,
and click next. And here are the fields that we need to complete for a receive
money transaction. In this first field we need to select from the same types of
transactions that we did for spend money. We’ve got direct payment, a prepayment, or
an overpayment. So in this situation a direct payment could be a payment that
you’ve received at the time of a sale that is not related to an open invoice,
or perhaps maybe a tax refund that you received, or interest earned from a savings
account. A prepayment can be a deposit that you received from a customer for
products or services that you will provide sometime in the future. And an
overpayment is if a customer happens to overpay you you, can enter this
transaction and reconcile it to the refund or the credit note that you sent
to your customer. So we’ll go ahead and enter a prepayment transaction here. In
this first fuel you want to go ahead and select the customer or supplier contact
that you received the payment from. If you have not set them up in Xero then you
can do so in this screen by typing the contact name and selecting New Contact.
Be sure to check out our lesson on How to Set Up Customer Contacts and
Suppliers to learn more about how to manage contacts. You can click here to access
this lesson. Go ahead and enter the date that you received the money in this field
here. The Invoice # field will automatically populate if the deposit
type is a prepayment or a customer deposit. Please note that this field will
not appear for the direct payment or the overpayment selections. The Reference
field is optional, this is the field where you can enter any additional
information: a purchase order number, or any type of reference document
information you’d like to include in this field. Branding: Xero will
automatically populate this field with the default branding template you are
set up for invoices. Please note that this field will only appear if you are
recording a prepayment or customer deposit.
Description: you want to enter the description of what the deposit was for
in this field here. Enter the quantity that was purchased in this field if
applicable. For Unit Price you want to enter the unit price or the total amount
that you received. The Account field allows you to select the account where
you want to categorize the expense to. Please note that you should set up a
separate account to track customer deposits or prepayments. If you happen
to use the default chart of accounts provided by Xero, then the prepayments
account is already set up for you. To learn how to add, edit, and delete
accounts, check out the How to Setup a Chart of Accounts lesson. You can click
here to access this lesson. For the Tax Rate field you want to go ahead and
select the appropriate tax rate if applicable. Check out our Sales Tax lesson
to learn more about how to set up, report, and pay sales tax. You can click here to
access this lesson. Region: region is a tracking category. If you want to track
income and expenses by department, location, sales rep, or another method,
select the tracking category from the drop down. To learn more about how to set
up tracking categories, check out the Organization and Financial Settings
lesson. You can click here to access this lesson. Xero will go ahead and
automatically calculate the amount for you in this column. Similar to spend
money transactions you can also attach supporting documentation such as deposit
slips, or perhaps a copy of that tax refund check to your transactions here.
Last but not least don’t forget to save your work. One of the most common
transactions that business owners will do is transfer money between business
bank accounts. To record a credit card payment in Xero, you would also create a
transfer from a bank account to the credit card account that you want to
make the payment to. Xero makes it very easy to record transfers and credit card
payments between accounts that have bank feeds set up. To record the transfer
between bank accounts, let’s go ahead and walk through those steps now. Let’s go
ahead and click on the plus sign, and all the way at the bottom we’ve got transfer
money. Here are the fields that we need to complete for a transfer money
transaction. In the first field we want to go ahead and select the bank account
that you are withdrawing the funds from. And in the To field we will select the
account that we want the money to be transferred to. The Date field should be
the date that you actually plan to make the transfer with your bank. And then the
Amount field. It also may be helpful to complete the reference field if the
transfer is for a specific purpose. You can also use this field to record the
transfer transaction number should you go ahead and make a transfer online
perhaps with your bank, or even be a telephone. So once you’ve completed all
of these fields you can go ahead and move forward with the transfer. And then
you should see a transfer successful option here. That wraps up the lesson on
how to manually enter bank and credit card transactions in Xero. To access our
full Xero course or any of the other lessons in this series, click this link.
You can also find a link below this video for a free 30-day trial of Xero. If
you have feedback about this course or if you have any questions, please leave a
comment below. Also don’t forget to subscribe.


Reader Comments

  1. Your videos are so clearly explained, thank you. I do have a question about credit card transactions though as I have a problem with them. The business credit card has been set up as a current liability in the chart of accounts, the transactions have been entered as Spend Money transactions – the problem is the Balance Sheet is showing the credit card debt owing as a positive amount under the Current Liabilities section. By positive I mean it has brackets around the amount whereas it should be showing up as a credit card debt. I have searched the net looking for a solution to this problem but have been unsuccessful. I would appreciate any thoughts you could offer.

  2. Great job; please guide me how to set Xero for rental business in a way to have control over rental items and can easily know which item has been returned and available for letting on rent again. Thank you

  3. Thanks for the video. Could you please tell me, Do I have to reconcile a manually entered transaction? I can see that it is written "Unreconciled" in front of it.

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