Last editedOct 20234 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.
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
Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).
Easily set up & schedule Direct Debit payments via payment pages on your website checkout or secure payment links.
From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled 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
Startle Music, a tech company that curates atmospheres for retail and hospitality brands, seamlessly automated their payment collection process by integrating GoCardless with 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,
However, with GoCardless and Xero, Startle transformed their manual process into a completely automated one, Adam notes,
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,
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,
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.
FAQs: GoCardless Xero setup
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. Log into our dashboard or connect to your existing business software, such as Xero, Salesforce or Zuora.
Arrange payments in just a few clicks. Set up instantly confirmed payments to take via your invoices, website, emails or even SMS.
Set up, sit back, and relax.
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.
Does Xero integrate with GoCardless?
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.