Cloud Bank Feeds, Bank Rules and Banking 2.0 – a win for customers

Research has shown that a sizeable percentage of small businesses do not use accounting software to manage the financial aspects of their business. Instead they may use a combination of spreadsheets, pen and paper records and boxes of receipts that are provided to their accountant at the end of each financial year.

There are a couple of reasons for this. Firstly desktop accounting systems have long been the domain of the bookkeeper and accountant as they are not particularly intuitive or easy to understand by a person without some level of bookkeeping/accounting knowledge. Secondly especially during start up phase, many business owners are very cost conscious and reduce all expenditure seen as non-essential and accounting software often falls into the not immediately essential group and then tends to remain there.

The preconception about the difficulty of using accounting software still lingers even though it is now six years since Xero first came along bringing intuitive, end-user focused cloud-based accounting software that innovatively streamlined several previously labour intensive manual processes.

Xero challenged the status quo of three groups of people

  • Other accounting software suppliers by setting industry standards that they had to emulate.
  • Accountants and Bookkeepers by challenging their business methodologies and models.
  • Business owners by enabling accounting software to be a function they could handle.

And it was initially the bank feeds and bank rules that forced these groups of people to sit up and take notice. My background had been corporate ERP and it did take me a while to fully appreciate the potential of these features for small businesses that do not run an Accounts Payable function. These businesses pay for many purchases using debit and credit cards or direct debit authorisations or enter invoices when they are paid, they don’t record Purchases (MYOB) or Bills (Reckon Accounts).

Xero supported these business processes through:

  • Bank Feeds in Xero enabled businesses to download transactions directly from their bank and credit card accounts into Xero, code them to the relevant expense account and reconcile their bank account to the bank’s records.
  • Bank Rules enabled users to predefine how a regular or recurring transaction will post into expense accounts when specified parameters are met.

The beauty of these two features is that the bank feeds ensures that bank transactions are completely and correctly reflected in the accounting software on a timely basis  and the bank rules (as long as they are correctly set up initially) allows automated correct consistent entry of transactions.

Overnight Xero set standards that other accounting software suppliers have had to follow. I took a closer look at how some of these cloud software suppliers have responded to the challenge from Xero.

Features supported:


  • Create a bank rule directly from a downloaded bank transaction or via the menu
  • A number of parameters using Any or All function are available
  • Select a match based on variables Contains, Equals and Starts With
  • Allocate to multiple accounts based on Fixed Value or Percent and a mix of these
  • Apply the rule to a nominated bank account or all bank accounts – only Xero allows for this
  • Set Priority on rules so where a transaction could meet two rules, the higher priority rule is used
  • Visible display showing if the suggested coding is based on a rule, a match to an existing transaction (sale or purchase) or based on a previous entry and a choice to accept the suggestion or change.
  • Bank transactions awaiting match/coding clearly displayed on one side of the screen and suggestions on the other
  • Can sort by Unreconciled transactions to see entered bank related transactions not match to a bank feed.
  • Cash Coding (available only to Advisors) can speed up coding
  • Transfers between bank accounts are neatly handled on the Matching screen
  • A Xero only feature is the ability to record a discussion point on a transaction for client review and update
  • A disadvantage is that only 9 transactions are displayed on a screen at any one time although the Fast Coding tab available to Advisors can speed this up

QuickBooks Online

QBO extensively updated its bank rule functionality late last year so they are now much more comprehensive.

  • Access to bank rules is only available from a drop down option against a button labelled ‘Upload’ (hard to find for the uninitiated) and not directly from a transaction.
  • A number of parameters using Any or All function are available.
  • Description, Bank Text or Amount are all available for the rule.
  • Variables to match on include Contains, Equals or Doesn’t Contain.
  • Visible display showing if the suggested coding is based on a rule, a match to an existing transaction (sale or purchase) or based on a previous entry and a choice to accept the suggestion or change.
  • Set Priority on rules.
  • I have to click on a transaction to see all the details – however I can see more than 9 transactions on one screen and can sort the uncoded transactions by any of the column headings which is a plus.
  • There are a couple of features enabling speedy coding and matching – the tab for ‘recognised’ transactions, and the Bulk Action option.
  • There is an Export and Import function available for bank rules – only in QBO.
  • Transfers between bank accounts can only be manages by a Money In and Money Out rules.


Saasu has fairly recently delivered Bank Rules, they were in Beta for quite some time however the functionality is still fairly rudimentary.

  • Bank rules can only be accessed via the transaction that is to have the rule applied.
  • The bank text field is the only parameter available for matching.
  • Variable available are only Contains or Matches Exactly.
  • No option for All or Any to enable specification of multiple criteria.
  • Once the Rule is in place, it is applied automatically to transactions that meet that criteria with no user intervention – could cause unexpected results .

Reckon One

I tested this on the new version of Reckon One just released at the end of May

  • Create a bank rule directly from a downloaded bank transaction or via the menu.
  • The matching variables are field sensitive so the rule can be very precise.
  • A number of parameters are available but not Any or All.
  • Allocate to multiple accounts based on Amount or Amount and Percentage.
  • Match to existing transactions.
  • Does not readily manage Transfers between bank accounts.

MYOB Essentials

  • Clear access to function from menu drop down but not via the transactions
  • Allocate to multiple accounts based on Amount or Percentage
  • Must enter description and then optionally enter the amount – can’t match just on amount
  • Allocate by Amount or Percentage
  • Recognises a transfer between bank accounts
  • If bank transaction is matched to an existing transaction, I have to open up and confirm
  • No recognition based on previous coding

There are pluses and minuses in all of the solutions but overall I do consider Xero to be the most feature rich solution with QBO coming a close second.

However Xero has always been a trend setter, pushing boundaries and whilst bank feeds and bank rules were the initial new concepts, they haven’t stopped there. CEO Rod Drury has long had a vision to bring internet banking and accounting software closer together. So Xero gave us Payment Services a feature that enables customers to click a link on an invoice and pay online through a number of payment services supported by Xero. Then we got POLi an online payment option which facilitates a Pay Anyone payment from a customer’s bank account to a merchant providing an alternative to credit card payments.

And finally we are starting to see fruition of a long term goal – a partnership between software and banking suppliers. Xero now has the numbers to make partnership a viable proposition to Australian banks with first cab off the rank being NAB .

However Xero is not alone in this move, Saasu too has been exploring possibilities and announced a similar partnership with Westpac in April.

And all of this adds to a significant gain for small business owners – and to quote Intuit – making the accounting experience ‘seriously easy’.


5 comments on “Cloud Bank Feeds, Bank Rules and Banking 2.0 – a win for customers

  1. I’m posting links to your brilliant work in my Facebook Group ACcounting and Bookkeeping Entrepreneurs with its own hashtag #MoreFromMargaret. Such is the quality of your work. “)

  2. Great article as always!

    With regards

    Judit Nagy

    0413 353 938

    eTrack Logo FINALxero-logokerekes email signature SMALL.pngBas agent logo 96184006email logo linkedin logo.jpgMYOB approved partner

    DISCLAIMER: This e-mail and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this e-mail in error please notify the sender immediately and delete the message from your system. Confidentiality and legal privilege are not waived or lost by reason of mistaken delivery to you. The sender does not accept any liability for the contents of this message including but not limited to any computer viruses

  3. People need to BE VERY CAREFUL using bank downloads………..I have seen this for myself when a Client (not my client) told an Accountant what was being purchased at a certain place for the dowload to be coded………..WRONG as only a very small percentage of that bill was claimable on the business and the rest was of a private nature………..just saying…..be very careful. If the Client tells you ‘that’s fuel’ it might or might not be claimable depending where it’s used! The case I saw would have been happening previously by my guess also!
    It’s not hard to do the job properly .. enter bill / pay bill and then you have a complete record………it’s pretty fast when you do lots of it!

    • Best Practice is to match the Bank Transaction to a receipt. Systems using Bank Downloads are extremely efficient when used in conjunction with a system such as Shoeboxed, Receipt Bank or Entryless. Having an invoice in creditors that matches the bank transaction is a sure way of identifying it correctly. We havent yet reached the point where clients are buying non deductible items like toys for example and having an invoice for exactly same amount of fuel and trying to pass it off as fuel. Systems must be set up correctly.

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