Bacs is usual the method by which larger companies in the UK make bank payments. It is often confusing for smaller companies who aren’t yet signed up with Bacs. As a regular Xero user you likely have encountered Bacs payment files when running payroll, or when making a batch supplier payment.
Your finance team has a number of options on how to best take advantage of Xero when it comes to making payments. You can sign up with Bacs in order to import Bacs payment files for payroll and supplier payments. Or, you can find a payment system which integrates with Xero: Pay with Wise, Credec, or Telleroo (that’s us).
Regardless of which banking system or Bacs provider you are using, you will need to store your employee and supplier bank account details in Xero.
To store employee bank details in Xero, navigate to Payroll and go to Employees, this will give you a list of all your employees.
Clicking on the employee name will give you the above menu. Select Electronic Transfer and input the employee’s bank details below. Xero doesn't validate the submitted bank details upon input.
Scroll down to the Batch Payments section under a Xero contact. You can submit your supplier bank details here. Make sure you input these in the right format: Sort code and then account number in one string as per below:
You can leave Bank Account Name empty. The “Supplier reference” field is important. We have dedicated a whole section to batch payments references as this has caused confusion to Xero users in the past.
There is an alternative way to add payment details to a supplier in Xero. When running a batch payment you can add bank account details on the fly without having to click into the contact:
Under “Bank account” you can add Sort code and Account number. Note here that Xero doesn’t do any validation on these details so you could theoretically insert the wrong details and it wouldn’t get flagged. Once added here it will get automatically populated under the supplier contact.
In the context of Bacs payments and storing corresponding payment records, Xero do a fabulous job of limiting access as to who gets to add and edit bank account details, see below:
It is important to manage this properly otherwise this may lead to mistakes, i.e. paying the wrong supplier large amounts. Xero is a secure place to store bank details. They will send out the below email to all bank account admins if bank details have been changed:
You usually receive an immediate message from the Xero Security Team highlighting that bank account details have been edited.
You have a number of different options to choose from when it comes to making batch payments in Xero.
Your choice will depend on the number of suppliers that need paying a month, and whether or not you usually have to set up many new suppliers. Telleroo is the best option if you have multiple suppliers or employees to pay.
This has been a source of confusion for many years. Some Xero users prefer to make one payment per invoice, others prefer to group multiple invoices from the same supplier into one payment. This alone makes the allocation of the right reference difficult. We have put together some guidance below.
Some companies need to pay the same supplier repeatedly, whereas others only have one off payments to make. With Telleroo you can group multiple bills into one group payment using the contact reference.
You have three options to choose from:
Yes you can do a Bacs run on Xero. The problem is that you need to first go through the process of registering with Bacs. Learn more about how to get Bacs registered here.
In order to produce a Bacs payment file in Xero you need to add your Bacs Service User Number (SUN) to your payroll settings. This is under “Payroll Settings” under your overall settings in Xero. See below:
If you don’t have a SUN, fill in a dummy one, a six digit number, or if you have a SUN then add it to the field “BACS Service User Number (SUN)”.
If you don’t have a Bacs Service User Number (SUN), you can still download Bacs payment files to submit to Telleroo. All you need to do is add a dummy six digit SUN to your “Payroll Settings”. This has been raised a few times by Xero users before (here).
With Telleroo you are in full control of the format we push back transactions to Xero. Depending on the payment type, payroll or supplier payments, we either send one line per batch or one line per payment to Xero, whatever you prefer.
Any changes you are making on Telleroo are immediately reflected in Xero.
A Xero Bacs payment file contains payment records and amounts of payments to be submitted to Tellerooo. Provided you keep employee or supplier payment records in Xero you can download a Xero Bacs payment file. We advise against opening the Bacs file as it comes in a txt format which isn’t made for humans to read. About 90%+ of wage payments use this format, so it works.
You can set a future date as and when you want your payments to go out.
When using Xero with Telleroo you can set any payment date here and we will schedule your payment run for this date at 10am.
In order to process a Xero Bacs payment file you need to be registered for Bacs, or become a Telleroo customer. Telleroo accepts any regular Bacs payment files without any bank approval needed. We have done a detailed post on how to sign up with Bacs here. Generally, it's only worth registering for Bacs if you have over 500 employees.
As you can tell by the length of this piece, you need to think this through before getting started. You need to have a Bacs facility with your bank to fully take advantage of Xero Bacs payments. Any business with less than 500 employees should look into alternatives.
Telleroo integrates beautifully with Xero Bills and Xero Payroll, ensuring a seamless process from payment submission through to reconciliation. Sign up for Telleroo today to make payments from Xero faster and easier than ever.