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How to set up direct debit payments in Xero

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Last editedApr 20233 min read

Australian businesses can improve their cash flow and make life simpler for customers by accepting direct debit payments. It cuts down on invoice payment times too, and the setting up process as outlined below is straightforward for businesses in Australia.

If you are a user of Xero accounting software, then Xero direct debit is especially easy to integrate with GoCardless for Xero. Here’s our quick guide on how to set up Xero in Australia.

How to collect direct debit payments with GoCardless

  1. First create your free GoCardless account, then simply access the user-friendly payments dashboard and connect your accounting software, if you use one.

  2. Once the free account is created, payment pages on your website checkout or secure payment links can be easily set up so you can schedule direct debit payments.

  3. GoCardless will then automatically collect all due payments on the scheduled date, so you get paid on time, every time. Too easy.

How do I set up a direct debit in Xero?

If you don’t already use Xero accounting software, then you might want to consider it, as it lets you create and issue invoices for your customers. You can then take advantage of Xero direct debit payments, as well as the uncomplicated Xero GoCardless integration.

An integrated GoCardless for Xero set-up is the easiest way to quickly gain the benefits of direct debit payments, so here’s a general rundown of how the process works:

  1. Set up an account with a direct debit provider, either directly or via Xero’s platform.

  2. Send the customer an invitation to pay via direct debit. The invitation includes a form for the customer to fill out, which authorises payments from their bank account.

  3. Set up the payment, which can be either a one-off invoice or a recurring service.

  4. The customer then receives an automatic notification before each direct debit is taken out of their account.

  5. Lastly, the payment is pulled from the customer’s account and transferred into your account. The provider’s fee is taken from this payment.

You can continue to manage this entire process online.

How to set up Xero direct debit with GoCardless

Now we explain the process in greater detail, specifically for Australian GoCardless users who want to learn how to reconcile direct debits in Xero. 

1. First log into Xero and add GoCardless as a payment service:

  • On the Payment Services screen, click the organisation name, selecting ‘Settings’ followed by ‘Payment Services’.

  • From an existing invoice or invoice template, click ‘Get Set Up Now’ under ‘Online Payments’.

2. Now click on the ‘Get Started’ prompt next to ‘Direct Debit’, where you can select one of the following options:

  • Choose ‘I have a GoCardless account’ to connect your existing account if you have one. You also need to indicate if you already have existing direct debit mandates.

  • Choose ‘Sign up for GoCardless’ if you need to connect a new account to Xero direct debit.

3. After choosing one of the previous two options, you are directed to the GoCardless website where you can either connect to your existing GoCardless account or create a new one.

4. Once the GoCardless account is connected, you are redirected back to Xero, where you can select your currency and the bank account where you want to receive your direct debit payments.

 5. Create a new fee account and click to continue on the ‘Let Xero manage your fees’ screen. This adds any applicable taxes.

The final step is to verify your account, which allows you to collect Xero direct debit payments using the Xero GoCardless integration.

How to add foreign currencies to Xero direct debit

If your business sends invoices to customers in multiple foreign currencies, then you can also get this set up by going to your Settings screen. Select ‘Payment Services’ and click through to GoCardless to edit the service details.

Now simply click ‘Add another currency’ and select the bank account you’ll be using. Xero can then create a separate clearing account for each currency you wish to set up.

How long does the Xero direct debit process take?

Processing times vary, but in general it takes around six working days for the customer’s very first payment to clear. This is because the bank needs to authorise the initial transaction, with repeated transactions from subscription or regular clients being much faster after the initial approval.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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