Seems like Brexit is causing all sorts of problems in ways that we didn’t pre-empt. For small Irish businesses using Xero, one irritating headache that it’s created relates to using bank feeds.
Xero’s Position on Irish Bank Feeds
In late November 2020, Xero released the following statement:
‘Our ability to provide bank feeds for Irish banks is reliant on being able to ‘passport’ our UK- regulated status into Ireland’ [but with the Brexit transition period ending on 31st December 2020 our] ‘ability to passport that status to Ireland will end on the same date’.
Or in other words, Xero is no longer able to provide automated bank feeds for Irish banks.
Xero are continuing to explore options including potentially piggybacking on third-party feed data providers. They are also looking at expanding the features of their data capture tool called Hubdoc (which comes free with certain Xero licences) so that it can read and export Irish bank statements. Ongoing UK/EU Brexit negotiations may also provide a silver bullet and allow for Xero to passport its regulated status again. However, all these options are more likely to be resolved in months rather than weeks. Small business users who have been using Xero for some time will remember that this is not the first time that bank feeds have been affected. Changes in EU Standards (PSD2 – the second iteration of the EU Payment Services Directive) on 14th September 2019 resulted in bank feeds going down for several months. The AIB bank feed was reactivated in January 2020 (about four months later) with the Bank of Ireland feed reactivated in early March (after around six months).
7 Ways to Deal With the Issue
It’s certainly hard to live without the benefits of a daily sync once you are used to it. So in the meantime, here are 7 ways that FinOps have addressed the issue for clients:
Manually Import Transactions
For users who were used to life before the bank feed (including when it was down in 2019/20) their preferred option was to return to manually imported transactions using a .CSV file in a Xero stipulated format. It’s quite a manual process and takes some getting used to if you’ve never done it before.
This method involves exporting bank data from your banking supplier and manipulating the file on a spreadsheet (or similar) before uploading it again via the Xero template. The risk from an accounting perspective is that transactions are missed, data is entered erroneously, or descriptions are misaligned. You will need to check that the transactions are correct and make sure to complete a bank reconciliation to match the bank statement to avoid errors. The risk is somewhat lower if there is someone in your business who is regularly reconciling the bank and is accustomed to the process – for this reason, some clients who have an in-house office administrator chose this method.
Xero officially advise manually importing transactions and give users detailed instructions on the methodology on their site in this article.
Enter Transactions Directly onto a Xero Template
For businesses with smaller numbers of transactions it is actually quicker to manually type in the bank transactions directly onto the .CSV template rather than exporting and sorting the data from the bank. As with method #1, always check the file before uploading as removing errors after the fact is time-consuming.
Manually Enter and Reconcile Transactions Directly in Xero
Again, this is a more likely option for businesses with a small number of transactions in any particular period. A combination of #1 and #2 can also be used depending on the volume or seasonality. It requires a little understanding of bookkeeping but nothing that can not be understood with basic training. First, select a bank account (Accounting >> Bank Accounts >> Account Transactions). Then open the help window whilst a bank account is selected. You will see a toggle option that is by default turned off. Toggle the ‘Enable Mark as Reconciled’ to reconcile transactions directly in Xero without the need to import statements.
Use a Third-Party PDF Converter
For PDF statements, Xero also recommends to ‘search online for a third-party conversion service to convert the PDF statement to one of these [specified] formats’. From a security perspective this may or may not suit all business owners and you should ensure that you are satisfied with the security of such a service.
Use a Data Capture Tool
Aside from cloud-based PDF conversion tools there are also some well-known data capture tools that are widely used throughout the industry and used by many small businesses, bookkeepers and accountants in Ireland. Xero’s own Hubdoc is one such tool although, as mentioned previously, they are currently only working on a bank statement extraction feature. The data capture tools Receipt Bank and Autoentry both have bank statement extraction features where you load the bank statement, and the App will subsequently produce the Xero .CSV file in the correct format. This is hugely beneficial compared to options #1 and #2 above, particularly if you have a high volume of bank transactions. It also reduces the risk of making mistakes when formatting the file – for this reason, some FinOps clients with higher transaction volumes chose this method.
There are pricing differences between the apps and which one you choose will depend on how you plan to use all the features. As an example, Autoentry, where you pay per use, may be preferable to a monthly subscription with the likes of ReceiptBank if you are only planning to use the bank extraction tool (and hopefully for only a short period of time).
Outsource the Task!
Importing bank feeds by any method is an additional daily finance task that some clients are just not prepared to take on right now. Let’s face it – it adds no value to your customers and is another menial task that most small businesses could do without. The repetitive nature of the task means that it’s easily outsourced to your finance operations provider. If you’re feeling overwhelmed, let them swoop in and take it off your hands.
Reduce the Amount of Transactions by Switching to Other Payment Providers that are Still Syncing
Ok, so switching banking provider might seem a bit drastic! However, some FinOps clients are using the Xero bank feed problem as an opportunity to review the type of the transactions that are going through their bank and credit card accounts to see if there are alternative options.
They are taking this opportunity to move small subscriptions and International payments to other payment providers. The one which appears to be gaining traction in Ireland is Revolut Business. Revolut’s integration is managed directly so these bank feeds never actually went down when Brexit came about. It has a handy subscription manager for online subscriptions along with prepaid card functionality and other features. Not many of our clients are using Revolut Business as their main bank account (it’s worth noting that they are not currently regulated by the Central Bank of Ireland) but they do keep a small balance and use it for expenses, online subscriptions and International payments.
Other options include the new generation of prepaid cards which can revolutionise the way you manage your small expenditures and online items. These prepaid card supplier integrations are managed directly so, again, these feeds never actually went down. With the advent of both COVID and now the Xero bank feed issue, some clients have reduced their Bank of Ireland, Ulster Bank and AIB credit card transactions along with redesigning their petty cash and expense claims management by migrating these types of transactions to the likes of SOLDO or PLEO.
At FinOps, we systemise and support your daily finance function. If you are looking for support and guidance with any daily finance tasks please feel free to contact us.