Processing payroll through Xero is easy but here is a handy tip to make processing payroll even quicker and easier: Use ABA files to make payments.
What is an ABA file?
An ABA file is a special file generated by Xero which can be “read” by your bank. It makes it easy to transfer your information from Xero straight into your bank account without having to retype all the data. In this case, it means you don’t have to retype into your bank account each employee’s pay, you can simply upload the file from Xero. Quicker, easier and less room for error.
How do I make an ABA file in Xero?
Use this feature after you have finished posting your payrun.
- On the Payroll menu, click PayRuns.
- Click on the Payrun you want to process.
- Click Pay Run Options and select Download ABA.
- Save the file (it will automatically name it after the year, month and date and with the file extension “.aba”. For example, 20170414.aba would be an ABA file created on 14 April 2017.
- Open your bank account but instead of choosing “pay anyone” find the option to “import” a file and import the ABA file you have just created.
- Once you have “imported” or “uploaded” the file you can view it to see the individual payments.
What will the payment look like on my bank statement?
Once you have approved the payment it will be made as a “bulk” payment or “batch” deposit. It will look like one big payment on your bank statement. The bank will know from your ABA file how the payment should be split to each of your employees.
How do I reconcile the payment in Xero?
Reconciling the payment is easy! Simply Create a “spend money” payment to Wages and allocate it to your Wages Payable account. In the description it is good to make a note of the payrun week for easy future reference.