If you are using Xero online account to manage the inflow and outflow of funds for your small business, then you are in luck. Being a Xero user, you must be pretty familiar with the processing speed, automated admin workload, and controlled key numbers of cloud accounting. All these are the features that make the management of finances smooth and controlled.   

Recently Xero integrated with a new feature that has completely changed how people can manage finances. It now has direct Integration with GoCardless. The Integration is made possible by the GoCardless app. The major things offered by this Integration are automatic invoice payments and reconciliation. Linking your Xero account directly to GoCardless will get you the advantages of collecting invoice payments from customers in a fast and efficient manner that you have never seen before. It minimizes the hassle that one has to go through to get invoice payments otherwise. 

It not only provides you with vital benefits to make finance management smoother, but the simplicity and straightforwardness will make customers fall in love with how it functions. As a result, you will receive payments quickly and efficiently and happier customers. It will also benefit the business in the long run.   

Some of the highlighted benefits include it being fast and simple, reduction of late payments, cost-effectiveness, an automated experience, and easy medium for customers. Let’s have some deeper insights into the benefits of using GoCardless with Xero. 

Removal of late payment issues with boosted cash flow 

If you are into the business world, then you must know how much of a headache late payment can be. Recent research shows that Businesses in the UK, with under £1million turnovers, have to wait for an average of seventy-two days for invoice payments to get cleared. You must always think about what it would feel like if you could get rid of late payments and have a boosted cash flow with GoCardless, that is exactly what you are getting. 

GoCardless allows you to collect invoice payments through its Direct Debit method. It is simply the easiest and most efficient way of collecting invoice payments without any delays. All you have to do is to assign a customer as a mandate. GoCardless then does the rest and makes sure that you receive the payment on time without having to worry. The due date is never missed, and your cash flow is always boosted up. You will have to stop worrying about wasting time chasing customers. There is no hindrance in the cash flow either. As a result, you can focus on your business with peace of mind.   

Around half of the startups in the UK fail in their first five years due to cash flow issues. The reasons mostly include late payments or invariable payments, and lack of cash liquidity to help with the growth of the business to keep it in black. GoCardless solves all these issues for you by providing a smooth and fast cash flow having a major positive impact on the health of the business. 

The Direct Debit Timeline: 

The Direct Debit service that GoCardless offers has a very simple yet promising timeline. In the first stage, you have to set up a customer as a mandate so you can have them in the list of people, you’ll be exchanging funds with. Once customers are updated to the mandated status, the second stage comes. The second stage is as simple as the first. All you have to do is create a Xero invoice in the name of the customer. Consequently, GoCardless will automatically send the customer a three days’ notice, which will remind them of the payment’s deadline, so you won’t have to. The third step doesn’t require any effort from you. GoCardless will automatically collect payment from the customer and inform you. The income will then be deposited two days post the due date. The fee is automatically reconciled as well. 

Convenient for Customers to pay 

If you compare GoCardless to other payment options, it is extremely simple and minimizes the hassle for the customers. As soon as customers are registered online, which only takes a few minutes, they can forget about the worries of missing any due date ever again. 

What’s great about Direct Debit is that it never requires a renewal like inflexible standing orders. It smartly manages all the irregular invoice amounts, price changes, and ad-hoc payments with ease. Offering GoCardless as an option to your customers adds real value. It makes their life peaceful and your life filled with improved cash flow and reduced worries of late payments. 

Automated reconciliation of payments 

Research has shown that an average UK business spends around 9 hours weekly handling business banking. Out of these 9 hours, most of them are spent on the bank reconciliation. It usually includes cross-matching the incoming customer payments with the invoices made. Everyone in the business world knows how big of an ordeal reconciliation of payments can be. 

The Xero and GoCardless integration solve this problem for you. It enables you to let go of the worry of chasing after payments. More importantly, you have nothing to worry about the reconciliation of payments. GoCardless has an automated feature that reconciles incoming payments to the Xero online invoice you generated. It saves a ton of admin time. Moreover, it helps keep the Xero numbers up to date, meanwhile delivering instantaneous reporting. 

Save up cost 

Many software that handles finances usually has set-up costs and subscription charges that can start to pile up over time. GoCardless has no such obligations, and you won’t have to worry about profits being eaten up by any such cost. 

The Xero account and GoCardless Integration is absolutely free. Moreover, the Direct Debit solution is absolutely cost-effective as the commission charged is very low compared to other software. You only have to pay 1% of the total amount being transferred, capped at £2. It keeps all the costs down and brings in a stable and foreseeable income flow in the most productive way possible. 

The fastest and simplest set-up procedure 

GoCardless Integration with Xero account is as simple as it sounds on paper. It only takes several minutes to set-up the whole system, and you are good to go. Let’s have a look into it step by step: 

  1. Connecting your Xero account to GoCardless. For this, you need to create a GoCardless account, which is a simple procedure. Then you need to complete the GoCardless for Xero online registration form. Once you are done your Direct Debit account will instantaneously emerge on your Xero Dashboard. As soon as it does, you will be all set to receive payments. 
  2. Now, you have to set up your customers. You can do this either automatically or manually. Just send your customers a request to fill the online registration form so that they can pay by Direct-Debit. 
  3. You are all set for collecting payments. Now you can collect all your payments automatically on the invoice due date. The payments will come directly into Xero. The waiting for payments to arrive is gone. 
  4. Automated reconciliation of payments. Once you have the setup and customers ready and payments incoming your invoices will be reconciled. You won’t have to lift a finger to do this. GoCardless will do this on it own and notify you as soon as it is done. It will also provide you with records of the fee being paid to Xero. Without you lifting a finger, and the GoCardless fee will be recorded as a fee straight to Xero. 

How the actual Integration works between GoCardless and Xero account 

To understand how the actual Integration between your Xero account and GoCardless work, you first need to understand the Double-entry method of record keeping. 

The double-entry bookkeeping 

Every time you make a transaction; it has two effects — one of you and one on the other party involved. For example, if you purchase a bag of chips from a local grocery store, you will pay cash to the shopkeeper. In return, the shopkeeper will provide you with a bag of chips. As simple as this transaction is, it has two effects from different perspectives. One is due to the buyer, and the other is due to the seller. The buyer’s cash balance will go down by as much as the bag of chips cost. On the contrary, the buyer will receive a bag of chips. Similarly, the seller will lose one bag of chips, but his cash balance will increase by as much as the bag of chips cost. 

Accounting works to record both of these effects of a transaction on the person or company’s financial records. Recording both effects is how the double-entry method is implemented. If the double-entry method is not applied, then certain problems can arise in the long run. The accounting records will shed light on an incomplete interpretation of the company or individual’s financial affairs. For example, if a person or company purchased a property in a time period, but it is not recorded in accounts whether it was purchased on credit or cash. The property could have been bought in exchange for another asset owned by the company or individual. In these situations, accounting records come into play as all information is recorded in them with both effects in the double-entry method. 

The most common name used for the two effects of accounting is Debit and Credit. The basic accounts principal is that for every debit entry, there is always an equal credit entry. This principle is more commonly known as the duality principle and has major significance in the accounting world. 

All debit entries fall under the following categories. 

  1. Any Increase in assets 
  2. Any Increase in expense 
  3. Any Decrease in liability 
  4. Any Decrease in equity 
  5. Any Decrease in income 

Credit entries fall under the following categories: 

  1. Any Decrease in assets 
  2. Any Decrease in expense 
  3. Any Increase in liability 
  4. Any Increase in equity 
  5. Any Increase in income 

The double-entry makes sure that the Accounting Equation is always balanced. The equation is Assets – Liabilities = Capital. Any increase in Debit will be counterbalanced by a decrease in the credit or an increase in liability or equity and vice-versa. Therefore, the accounting equation always stays in equilibrium. 

GoCardless does the same. It keeps a record of all incoming and outgoing invoices. All of this information is stored secured in your Xero accounts, and the Debit and credit always stay in balance. 

In Conclusion

The Xero and GoCardless integration offers a smooth and fast set up experience. The Xero and GoCardless connection requires no additional configuration. Once you are done through the simple process of setting up, assigned customers sign up, the automatic collection of payment starts and all the information regarding the transactions is sent to your Xero account and saved them. It saves hours of admin time and gives out accurate information for bookkeeping. The double-entry method used always makes sure your account stays in a solid balance. Features such as Direct Debit has made lives easier of many customers and companies and continues to do so. Integration is proven to be very efficient, as stated by the director of Xero. 

Edward Berks, EMEA Director, Fintech & Ecosystem at Xero, Xero UK, said: “The success of GoCardless’ Integration with Xero has been proved by the faster payments and cash flow improvements our UK customers have reported. More payment options mean we are levelling the playing field for small businesses, and the expansion of GoCardless to Australia shows how our app marketplace can help innovative tech companies to boost their growth across the world, improving effectiveness and efficiency for businesses everywhere.”