12 September 2024
How to centralise bill payments across multiple entities with a Xero payments Hub.
Managing payments across multiple entities can be a headache.
💡 We recommend this approach if you manage > 5 entities with < 50 bills a month per entity.
But with one Xero file and Parakeet, you can streamline the process, cut costs, and build a scalable operating model for your business.
No more logging into multiple Xero accounts or uploading separate ABA files to multiple bank accounts.
Now, you can create a central hub for all your bill payments with just 1 batch payment (instead of multiple ABA files) to a trust account.
💡 Here’s how you can make it work.
One Xero File, Multiple Entities = lower costs & scalable operations
Instead of managing multiple Xero files and juggling payments, reduce costs and simplify your operations by using a single Xero file.
This file, let's call it the Master Payment Entity (MPE), acts as a hub for all invoices across your related entities (e.g., MPE1, MPE2).
Here's how it works:
Channeling Invoices
All invoices for your entities (e.g., MPE1, MPE2) are routed to the Master MPE Xero file, consolidating everything in one place for easy management.
Suppliers Set Up per Entity
Each entity has a corresponding supplier set up in Xero. For example:
For entity 1 - MPE1-John Supplier
For entity 2 - MPE2-Jane Supplier and so on.
Link each supplier to their specific purchase/expense account:
For entity 1 - COGs-MPE1
For entity 2 - COGs-MPE2, etc.
Accurate Expense Allocation
When bills are allocated to an entity’s suppliers, the spend is automatically assigned to the correct chart of accounts. This provides visibility into each entity’s spending and simplifies recurring expense and payment allocation across related entities.
💡 Pro Tip: Consult with your accountant or bookkeeper to ensure best practices.
How it works with Parakeet
In Xero, once bills are approved and scheduled under the Master Payment Entity (MPE), Parakeet takes over:
Consolidated Payment Information
Parakeet sends you an email summary showing the total amount to be paid across all entities (e.g., $100,000 across 12 entities). You make 1 payment out of the MPE's account.
Funds. Transfers
Transfer the total ($100,000) to a trust account and Parakeet will disburse the funds to each supplier after a 3-day waiting period.
Clear Remittance Details
Parakeet sends remittance emails to each supplier with a detailed CSV breakdown of invoice information, making it easy for suppliers to reconcile. Suppliers will see the MPE entity's name on their bank statements.
Payer Protection
The 3 business days waiting period ensures:
Transfer Time
Gives you time to move funds to the trust account.
Payment Flexibility
Provides a 2-business day window to pull back payments if needed, before they’re disbursed.
Centralise and save
By consolidating payments into one Xero file and automating the process with Parakeet, you eliminate complexity, cut costs, and gain full control over your entity’s payments.
Consideration
If your entities handle a large volume of bills (over 50 per month) or operate as distinct business lines, maintaining separate Xero files may be a more effective solution. This can help streamline management and keep bill payments organised within each business unit.
For personalised advice on the best approach for your business, reach out to us or consult with your accountant or bookkeeper.
Questions?
You can learn more about it here.
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About Parakeet:
Parakeet is a certified financial services app in the Xero app store that automates bill payments (BPAY & EFT) out of Xero and removes the need for manual uploading of ABA files or BPAY batch files into internet banking.
See Parakeet's Xero App Store listing here.
Learn about Parakeet's automated BPAY Bills payment automation (AP) here
For more information, contact: media@helloparakeet.com
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