Last editedFeb 20255 min read
Accepting Direct Debit cuts down on invoice payment times to improve your business’s cash flow, and it makes life easier for customers too. If you use Xero accounting software, you might be wondering – can Xero do Direct Debit? Fortunately, the answer is yes, and it’s easy to integrate with GoCardless. Here’s how to set up Direct Debit payments in Xero.
Direct Debit with Xero and GoCardless
Have you added Direct Debits to your Xero account yet? If not, don't worry. Payment processes don’t need to be complicated.
While you can include your bank details on your Xero invoice, relying on your customers to manually transfer your payment can lead to frustration. Mistakes happen, like late payments and poor cash flow.
But there is a better way. Adding other payment methods to your Xero invoices can help you avoid these problems.
Direct Debits are a simple payment method that does the payment chasing for you. They are perfectly designed for collecting recurring payments.
If you’re already a Xero customer, you could benefit from adding Direct Debit payments via GoCardless. This is due to the simple integration of GoCardless into the Xero platform.
Now, on to the other benefits of using Direct Debits in Xero.
The Benefits of Direct Debit with Xero
For any business already using Xero, Direct Debits offer several benefits, typically:
Ending late payments – With Xero and Direct Debit, customers complete an easy, one-time setup. Then you can collect every payment automatically as soon as it's due. No more chasing – By automating payment collection, you could save hours chasing up customers about late payments. Automating admin – Stress less by having annoying, time-consuming financial admin taken off your plate. Reducing fees – Not all payment providers charge equal fees. Often, you'll find that Direct Debit payments can be cheaper per transaction than card payments, for example.
The benefits of Xero Direct Debits are clear for any business collecting recurring payments. It really is a simple way to automate payments and allows you more time to focus on your core business.
Now, let's show you how easy setting up a Direct Debit payment in Xero is.
How do I set up Xero Direct Debit?
Xero lets you create and issue invoices for your customers, but when the time comes for payment, you might be wondering: how do I set up a Direct Debit in Xero? It’s easiest to use an integrated Direct Debit provider like GoCardless. Here’s a general rundown of how the process works:
Set up an account with a Direct Debit provider either directly or via Xero’s platform.
Send customers an invitation to pay using Direct Debit. The customers will need to fill out a Xero Direct Debit form to authorise payments from their bank accounts.
Set up the payments, whether they’re for one-off invoices or recurring services.
The customer receives automatic notifications before Direct Debits are taken out of their account.
The payment is taken from the customer’s account and transferred into your account. The provider’s fee is taken from this payment.
You’ll be able to manage this entire process online.
How to collect Direct Debit payments with GoCardless
1.
Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).
2.
Easily set up & schedule Direct Debit payments via payment pages on your website checkout or secure payment links.
3.
From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled Direct Debit collection date. Simple.
How to set up Xero Direct Debit with GoCardless
Now we’ll explain the process in greater detail, specifically for GoCardless users who wish to set up Direct Debit payments in Xero. A video tutorial is below to make the GoCardless/Xero set-up easier.
1. To get started, you’ll need to log into Xero and add GoCardless as a payment service:
From 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. The next step is to click on ‘Get Started’ next to Direct Debit, where you can select one of the following options:
‘I have a GoCardless account’ to connect your existing account, selecting whether you already have existing Direct Debit mandates.
‘Sign up for GoCardless’ to connect a new account to Xero Direct Debit.
3. You will be directed to the GoCardless website, where you will either create a GoCardless account or connect your existing one.
4. Once the GoCardless account is connected, you’ll now be redirected back to Xero, where you can select the bank account and currency you wish 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 will add any applicable taxes.
You’ll then be able to verify your account as the final step, allowing you to collect payments using the GoCardless integration with Xero.
How to add foreign currencies to Xero Direct Debit
Do you send invoices to customers in multiple foreign currencies? You can also get this set up by going to your Settings screen, selecting ‘Payment Services’ and clicking through to GoCardless to edit the service details.
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 generally, it takes about six working days for the customer’s first payment to clear. This is because it needs to be authorised by the bank to set up this initial transaction. For recurring payments from subscriptions or repeat clients, you’ll find the process is faster after the initial approval.
Case Study: Xero + GoCardless Direct Debit and Xero
Startle Music, a tech company that curates atmospheres for retail and hospitality brands, seamlessly automated their payment collection process by bringing GoCardless Direct Debit into Xero. This shift resulted in significant efficiency improvements, reducing the company's administrative burden and costs and promoting a better overall experience for their customers.
Before the integration, Startle grappled with a labour-intensive manual process for handling direct debit payments. As their CEO, Adam Castleton, explains,Â
Our previous Direct Debit provider’s solution wasn’t at all automated. We built custom reports that we had to download into a spreadsheet, and we would then manually manipulate it before forwarding it to the provider to collect the payment.
However, with GoCardless and Xero, Startle transformed their manual process into a completely automated one, Adam notes,Â
The fact that our cloud system integrates to Xero, and GoCardless integrates to Xero, meant we could just plug the three tools together and have a chain that does everything for us.
In addition to automating the collection process, the integration of GoCardless with Xero significantly reduced the administrative work of the accounts team at Startle, as payments are reconciled and marked as paid automatically. With 80% of their clients now paying by Direct Debit via GoCardless, Startle has grown and managed to maintain the same size accounting team as they had six years ago, Adam noted,
For every new customer we onboard, we don’t create any more accounting admin.
The transition to GoCardless was also surprisingly smooth. Existing Direct Debits were seamlessly transferred to GoCardless without needing any action from the customers. This customer-focused approach enhanced the overall customer experience and solidified Startle's positive outlook on their future growth. In Adam's words,Â
Atmosphere and customer experience are more important now than ever... It’s also how we manage our own customer relationships, from the interaction with customer services through to billing and payments, whether it’s the online Direct Debit sign up process, or enabling flexibility on monthly billing dates – things that weren’t possible before GoCardless.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless and Xero can help you with invoice payments or recurring payments.
Set up Direct Debit payments in Xero now with GoCardless
Take control of your cash flow with our award-winning Direct Debit integration for Xero.
FAQs: GoCardless and Xero setup
Does Xero integrate with GoCardless?
Yes, Xero integrates with GoCardless, letting you collect one-off and recurring payments using GoCardless right from your Xero invoices. Xero reconciles the payment in your GoCardless clearing account. GoCardless transfers the payout to your bank account. Xero records the GoCardless fee as an expense when the payout occurs.
Can you use GoCardless for Direct Debit?
Yes, GoCardless is a global leader in bank payments such as Direct Debit. Here are the steps to get started with GoCardless Direct Debit.
Sign up for free and connect your Xero account.
Arrange payments in just a few clicks. Set up instantly confirmed payments to take via your invoices, website, emails or even SMS.Â
Set up, sit back, and relax while Xero DIrect Debit payments are collected automatically on the due date.
Why am I paying a Direct Debit to GoCardless?
We process Direct Debit payments on behalf of other organisations.
If you’ve seen GOCARDLESS LTD appear on your bank statement and you’re not sure what the payment relates to, use our secure tool to find out who you’re paying and what for.
