How to set up bank rules on Xero

intermediate 8 min read Updated 2026-03-18

Quick Answer

Bank rules in Xero automatically categorize recurring transactions by matching specific criteria like payee names or amounts. Set them up through the Banking menu by defining conditions and specifying the account and tax rate for matching transactions.

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Prerequisites

Active Xero subscription
Bank account connected to Xero
Admin or advisor user permissions
Understanding of chart of accounts structure

Step-by-Step Instructions

Access the Bank Rules section

Log into your Xero account and navigate to Banking in the main menu. Click on Bank rules from the dropdown menu. You'll see a list of existing rules (if any) and an option to create new ones.

You can also access bank rules directly from the bank reconciliation screen by clicking the rules icon.

Create a new bank rule

Click the New rule button in the top right corner. Choose the type of rule you want to create:

Spend money - for payments and expenses
Receive money - for income transactions
Transfer money - for transfers between accounts

Select the appropriate option based on your transaction type.

Start with your most frequent transactions to get the biggest time-saving benefit.

Set up rule conditions

In the Conditions section, define what triggers the rule:

Bank text contains - matches partial text in transaction descriptions
Bank text doesn't contain - excludes transactions with specific text
Amount equals - matches exact amounts
Amount is between - matches amount ranges

You can add multiple conditions using And or Or logic.

Use broader conditions first, then add specific ones to avoid creating too many similar rules.

Configure the rule actions

In the Then section, specify what happens when conditions are met:

Select the Account from your chart of accounts
Choose the appropriate Tax rate
Set a Description (optional but recommended)
Add Reference details if needed

For spend money rules, you can also set up tracking categories.

Use descriptive names for your rules to make them easy to identify and manage later.

Set rule priority and scope

Choose which bank account the rule applies to from the Apply to bank account dropdown. Set the rule priority - Xero processes rules in order from 1 (highest) to lowest priority. If you want the rule to apply to existing unreconciled transactions, check Apply to existing transactions.

Higher priority rules (lower numbers) will be processed first, so put your most specific rules at the top.

Test and save the rule

Before saving, use the Test this rule feature to see which transactions would match your conditions. Review the preview results to ensure the rule works as expected. If satisfied, click Save to activate the rule.

Always test your rules before saving to avoid incorrect categorizations that could affect your financial reports.

Monitor and refine rules

After saving, monitor how your rules perform during bank reconciliation. Check the Bank rules page regularly to see rule statistics and effectiveness. Edit rules as needed by clicking the rule name and adjusting conditions or actions.

Review your rules monthly and deactivate any that are no longer needed to keep your rule list manageable.

Common Issues & Troubleshooting

Bank rule not triggering for expected transactions

Check that your conditions are not too specific. Review the exact bank text in your transactions and adjust the Bank text contains condition to match partial text rather than exact phrases.

Rule applying to wrong transactions

Add more specific conditions using And logic, or use Bank text doesn't contain to exclude unwanted matches. Consider adjusting the rule priority order.

Cannot see the New rule button

Verify you have Standard or Advisor user permissions. Demo company users cannot create bank rules. Contact your Xero administrator to upgrade your access level.

Rule not applying to existing transactions

Make sure you checked Apply to existing transactions when creating the rule. If you forgot, edit the rule and enable this option, then save the changes.

Prices mentioned in this guide are pulled from current plan data and may change. Always verify on the official Xero website before purchasing.

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