A smarter way to code transactions in Xero

By
on
Jan 13, 2021

Are you being smart about how you code transactions in Xero? We weren’t. But our new CFO Sarah sorted it all out. Here’s what she did and why.

Most of us think coding transactions in Xero is a no-brainer: just choose the code that best describes the transaction.

But the mess resulting from this “no-brainer” approach is precisely what our new CFO Sarah spent hours cleaning up this week, so we’d have clearer reports. (Thanks, Sarah!)

Here, she shares her wisdom to help you avoid the mess and get more actionable reports and forecasts from your Xero data.

The more Xero account codes you use, the messier your reports

“Many people fall into the trap of coding a transaction with the aim to describe it, not report it,” Sarah says.

“There are a lot of account codes on Xero. The aim of the game is not to use as many as possible, it’s to code your transactions in a way that makes sense for your reports.”

It may be tempting to code a payment for posting a one-off package as ‘Freight & Courier’, because that’s the closest description. 

Don’t! 

If you’re not a freight company, it makes no sense to have a one-off ‘Freight & Courier’ transaction muddying your reports. Instead, code it as ‘Office Expenses’, or something management is interested in tracking.

With too many codes, you get meaningless charts like this:

giniPredict messy chart

“To organise your transactions on Xero in a useful way, you need to switch from thinking about now (coding the transaction) to thinking about the future (reporting the transaction),” says Sarah.

Here’s how.

Step 1: Decide what information you want reported

“Sit down with whoever’s in charge, and discuss what information matters most in the financial reports. Then base your codes on that.”

For example, do you need to distinguish ‘Advertising’ costs from ‘Marketing’ costs?
If it’s important to see how much you’re spending on paid adverts vs other marketing expenses like design and copywriting, then sure.
If not, it’d probably be more helpful to see them grouped under the same umbrella.

Do you need to know how much you spent on ‘Printing & Stationery’ this month?
If you’re not a printing company, ‘Office Expenses’ should suffice.

And is coding ad-hoc Uber trips as ‘Travel - National’ really necessary?

Really?

…Really? 

Step 2: Code/ recode transactions on Xero 

Go through all your transactions and code or recode them according to the list you agreed in Step 1.

Xero recode transactions

Here’s a guide from Xero on exactly how to do that.

Sarah spent hours recoding transactions from 30+ codes down to a more manageable list of 13 account codes that are most useful to us: 

  • Accounting
  • Bank Fees
  • Entertainment
  • General Expenses
  • App Expenses
  • Legal and Insurance
  • R&D - Product and Engineering
  • Recruiting
  • Rent and Office
  • Salaries and Benefits
  • Sales and Marketing
  • Software
  • Travel and Transport

Our charts used to be super complicated like the one above. Thanks to Sarah, they’re now nice and clear, like this one:

ginipredict clean chart with Xero

Your list may look a lot different, depending on your company.

And don’t worry about being too general — if you ever need to do a deep-dive into an account code, it’s easy. In Xero, go to Accounting > Chart of Accounts, and click on the YTD value of an account code to see all transactions listed under that code. 

Xero account office expenses

Step 3: Set up a system for ambiguous transactions

Some transactions may apply to more than one code, like marketing software, for example, which could apply to both ‘Sales and Marketing’ and ‘Software’.

“We discussed it and decided it’s easier for us to keep track of software expenses if they’re in one place. It’s not as important to see which department they’re for.” Sarah explains. “So we code our marketing software transactions under ‘Software’.”

“It’s definitely worth having discussions like these to get clear on what the reporting objectives are.”

Voila! You’re done.

Now you can sit back and relish in the fact that you did good. Thanks to you, the team has crystal clear reports, with information they can easily make decisions from.

Go treat yourself to a coffee!

Try giniPredict free banner


Contact us
Case study

A smarter way to code transactions in Xero

Case study

A smarter way to code transactions in Xero

The results
A major international bank found gini to be the most efficient data enrichment provider for its digital banking upgrade initiative.

In a pilot project with gini, the bank ran 50,000 transactions through our data enrichment engine.  Within 72 hours, gini had enriched 95.7% credit card transactions and 92.7% EPS transactions. 

“We were surprised just how fast gini’s enrichment capabilities are. What we expected to take 3 weeks took them only 3 days,” said the bank’s Head of Innovation and Strategy. “On top of that, they even enriched EPS transactions, which no other provider has achieved.”
Credit card
transactions enriched
EPS
transactions enriched
The results
gini introduced a successful Savings Goal feature in our PFM app that was adopted by 60% of users within 30 days of launching.
 
Our users engage with the Savings Goal feature an average of 7.4 times a month, which when compared to the once-a-month engagement of most banking apps, is a testament to its value. 

And the reviews were overwhelmingly positive, with comments such as, “Congrats on the release of the saving function, it’s very helpful and motivates me to save more!” and “Makes saving and budgeting a lot easier.”

Makes saving and budgeting a lot easier.
The challenge
Our research showed that users wanted a savings feature that automates their budgeting calculations, and shows how much they have left to spend after putting their savings aside every month.

However, no PFM apps in Hong Kong had a feature like this because it requires complicated algorithms and enriched transaction data. Without merchant names for example, it’s difficult to label recurring transactions accurately, and give the user a clear, comprehensive overview of their finances.

The solution
With data automatically enriched by our machine learning models, gini was able to build a fully functioning Saving Goals feature that resonated with users and increased engagement.

The new feature automatically calculates a monthly OK to Spend amount by subtracting the user’s total monthly expenses (past and upcoming) and Savings Goal from their total monthly income. It also has a traffic light system that warns users when it’s time to reign in their spending.

None of this was possible without first enriching the transaction data with accurate merchant names and categories.
The challenge
A recent digital banking survey showed low levels of satisfaction, with 87% of customers finding it hard to understand their transaction feeds.
My current spending history is confusing. I want to see the ACTUAL shop name.
To address this — and reduce queries — the bank planned to first replace standard transaction codes with clear merchant names and categories throughout its digital banking services. And then to increase loyalty with a personal finance app, built on the foundation of enriched data. 

However, developing the technology to transform such large volumes of transaction data was proving to be a Herculean task — one that would take years. So they looked for an external provider to help clean, structure and enrich the data accurately and quickly.

The solution
Impressed by the quality and speed of gini’s enrichment engine in the pilot project, the bank plans to integrate our scalable software into their own systems to allow for real-time data processing and enrichment. The best part is, gini’s technology is easily accessible as a SaaS solution on AWS Marketplace, avoiding the need for lengthy tech stack integration processes.

Soon, the bank’s entire customer base will have their transaction feeds transformed from confusing codes to recognisable merchant names, logos and categories. This is predicted to have a significantly positive impact on NPS scores.

Equipped with enriched data, the bank’s development team will then be able to build a competitive personal finance app with much richer features than otherwise possible.
Contact us to find out more about our digital banking data solutions
Contact us
Find out how data enrichment can help you build better PFM features
Contact us

Open banking in 2020: Are you ready?

Open banking is primed to become the new norm in Asia Pacific. But, as our research report shows, the majority of bankers in the region are not sufficiently prepared for what’s coming.

It’s time to get smart on what open banking is and how it’s expected to impact the market this year. 
gini's original research report on open banking in Asia Pacific for 2020
Download the research report
Download the open Banking 2020 research report by gini
We interviewed more than 300 finance and technology thought leaders across Asia on the industry’s readiness for open banking this year, with surprising results. 
Download our Open Banking 2020 research report to find out: 

The opportunities in store for all participants
The barriers to adoption
Who is expected to benefit most 
How institutions can generate revenue from open APIs
And more

A smarter way to code transactions in Xero

By
on
Jan 13, 2021

Most of us think coding transactions in Xero is a no-brainer: just choose the code that best describes the transaction.

But the mess resulting from this “no-brainer” approach is precisely what our new CFO Sarah spent hours cleaning up this week, so we’d have clearer reports. (Thanks, Sarah!)

Here, she shares her wisdom to help you avoid the mess and get more actionable reports and forecasts from your Xero data.

The more Xero account codes you use, the messier your reports

“Many people fall into the trap of coding a transaction with the aim to describe it, not report it,” Sarah says.

“There are a lot of account codes on Xero. The aim of the game is not to use as many as possible, it’s to code your transactions in a way that makes sense for your reports.”

It may be tempting to code a payment for posting a one-off package as ‘Freight & Courier’, because that’s the closest description. 

Don’t! 

If you’re not a freight company, it makes no sense to have a one-off ‘Freight & Courier’ transaction muddying your reports. Instead, code it as ‘Office Expenses’, or something management is interested in tracking.

With too many codes, you get meaningless charts like this:

giniPredict messy chart

“To organise your transactions on Xero in a useful way, you need to switch from thinking about now (coding the transaction) to thinking about the future (reporting the transaction),” says Sarah.

Here’s how.

Step 1: Decide what information you want reported

“Sit down with whoever’s in charge, and discuss what information matters most in the financial reports. Then base your codes on that.”

For example, do you need to distinguish ‘Advertising’ costs from ‘Marketing’ costs?
If it’s important to see how much you’re spending on paid adverts vs other marketing expenses like design and copywriting, then sure.
If not, it’d probably be more helpful to see them grouped under the same umbrella.

Do you need to know how much you spent on ‘Printing & Stationery’ this month?
If you’re not a printing company, ‘Office Expenses’ should suffice.

And is coding ad-hoc Uber trips as ‘Travel - National’ really necessary?

Really?

…Really? 

Step 2: Code/ recode transactions on Xero 

Go through all your transactions and code or recode them according to the list you agreed in Step 1.

Xero recode transactions

Here’s a guide from Xero on exactly how to do that.

Sarah spent hours recoding transactions from 30+ codes down to a more manageable list of 13 account codes that are most useful to us: 

  • Accounting
  • Bank Fees
  • Entertainment
  • General Expenses
  • App Expenses
  • Legal and Insurance
  • R&D - Product and Engineering
  • Recruiting
  • Rent and Office
  • Salaries and Benefits
  • Sales and Marketing
  • Software
  • Travel and Transport

Our charts used to be super complicated like the one above. Thanks to Sarah, they’re now nice and clear, like this one:

ginipredict clean chart with Xero

Your list may look a lot different, depending on your company.

And don’t worry about being too general — if you ever need to do a deep-dive into an account code, it’s easy. In Xero, go to Accounting > Chart of Accounts, and click on the YTD value of an account code to see all transactions listed under that code. 

Xero account office expenses

Step 3: Set up a system for ambiguous transactions

Some transactions may apply to more than one code, like marketing software, for example, which could apply to both ‘Sales and Marketing’ and ‘Software’.

“We discussed it and decided it’s easier for us to keep track of software expenses if they’re in one place. It’s not as important to see which department they’re for.” Sarah explains. “So we code our marketing software transactions under ‘Software’.”

“It’s definitely worth having discussions like these to get clear on what the reporting objectives are.”

Voila! You’re done.

Now you can sit back and relish in the fact that you did good. Thanks to you, the team has crystal clear reports, with information they can easily make decisions from.

Go treat yourself to a coffee!

Try giniPredict free banner


Contact us

Latest posts

Subscribe

Get feature updates, plus insights from other business owners delivered to your inbox.
Request access

By clicking submit, you consent to allow gini to store and process the personal information submitted above to provide you the content requested.