Xero doesn't collect direct debits itself, so you connect a payment provider to your Xero organisation, ask each customer to sign a mandate once, and the provider collects on each invoice's due date and posts the payment back to Xero. The setup is quick once the provider has approved your business, and the work that carries on afterwards is chasing unsigned mandates, handling failed collections and reconciling payouts.
In this article
The short version
- Xero doesn't collect direct debits: a connected provider holds the mandate and takes the payment
- Each customer signs one mandate, which covers future invoices even when the amount changes
- Most integrations record payments through a clearing account; gross payouts make that a straight match
- Unsigned mandates and failed collections are the ongoing work, and Xero's email reminders don't cover them
- With 10 or more mandates, Adfin moves them from another provider without customers re-signing
What you need before you start
You need a direct debit provider that connects to Xero. Xero's own online payment settings connect GoCardless and Stripe, and other providers connect through the Xero App Store. Xero doesn't charge you to switch on online payments; you pay the provider's transaction fee.
Every provider checks your business before you can collect, so allow a few days before your first live collection. Direct debit approval often includes a short onboarding call. Some providers ask for your own Service User Number, the identifier banks use for a collecting business; others collect under their own, in which case their name appears on your customers' statements unless you pay to show yours.
It's also worth deciding up front which customers you want on direct debit. Regular fees and retainers suit it well. A customer who pays a one-off project invoice may be happier with a payment link.
How to set it up in Xero
The screens differ by provider, but the steps follow the same pattern.
- Connect the provider: log in to Xero from the provider's settings, choose your organisation, allow access and pick the bank account your payouts go to.
- Choose which invoices it handles: you can usually send every invoice you approve, or use Xero branding themes to pick: one theme for direct debit customers and one for customers paying by link. Remove other payment services from those themes so customers don't see two ways to pay the same invoice.
- Approve without emailing: if the provider sends the invoice for you, click Approve in Xero, not Approve & email, so your customer doesn't get it twice.
- Get mandates signed: send each direct debit customer a mandate request. They enter their account name, sort code and account number once, and their bank usually activates the mandate within three working days.
- Let it run: for a customer with an active mandate, the collection is scheduled for the due date, after advance notice. One mandate covers future invoices, even when the amount changes.
When the payment is collected, the invoice is marked as paid in Xero, and credit notes or part payments you apply in Xero change the amount still to collect.
What lands in your Xero bank account
Direct debit payouts arrive as lump sums covering several invoices, so most integrations use a clearing account in Xero. Payments are recorded into the clearing account, and each payout is recorded as a transfer from it to your bank account, which you match against the line in your bank feed.
How clean that is depends on the provider. GoCardless takes its fees out before paying you, so its Xero integration posts each payment to a Direct Debit clearing account, books the fees to a bank fees account and transfers the net amount.
Adfin pays out gross. Its Xero integration also works through a clearing account, but each transfer equals the payments behind it, there's no fee to split out, and the fee arrives as a separate invoice. Payouts go out every weekday, and direct debits reach you within three working days of the collection date.
Unsigned mandates and failed collections
A customer who hasn't completed the mandate form can't be collected from, and a direct debit can fail when there isn't enough in the account. Both need chasing, and Xero's own invoice reminders aren't built for it: they go by email, on one schedule for all your customers, and keep going until the invoice is marked as paid.
GoCardless charges its fee on every payment you submit, including ones that fail, and doesn't chase. If you'd rather that follow-up ran itself, Adfin's Customer Agents remind customers to sign their mandate, retry a failed direct debit for free and then ask the customer to pay another way, with reminders by email, SMS or WhatsApp from your own email domain, on rules you set.
If you already collect through another provider, you don't need to start again. With 10 or more mandates, Adfin moves them across through the Bacs bulk change process and your customers don't re-sign.
Common questions
Can Xero collect direct debit on its own? No. Xero records the invoice and the payment, and a connected provider such as Adfin, GoCardless or Stripe collects the money.
Does my customer have to sign for every invoice? No. They sign one mandate, and it covers future invoices, including different amounts, as long as they get notice before each collection.
How long after the due date does the money reach me? With Adfin, within three working days of the collection date, paid in full. GoCardless pays out with its fees already taken off.
Do I need a clearing account in Xero? Most direct debit integrations create one for you. Payments land there and each payout is recorded as a transfer to your bank account.
What does direct debit cost through Xero? Xero charges nothing extra for online payments. Adfin charges 1% + 20p per successful payment, with the 1% capped at £4, and nothing for failed payments.
Can I move my GoCardless mandates without customers signing again? Yes, if you have 10 or more. They move through the Bacs bulk change process; with fewer than 10, customers sign a new Adfin mandate.
Sources
- Xero - Invoice payments: give your customers more ways to pay (accurate as of October 2026) https://www.xero.com/uk/campaign/invoice-payments/
- Adfin Help Centre - Connect your Xero account to Adfin (accurate as of October 2026) https://support.adfin.com/en/articles/10199659-connect-your-xero-account-to-adfin
- Adfin Help Centre - Getting started with direct debits (accurate as of October 2026) https://support.adfin.com/en/articles/10192945-getting-started-with-direct-debits
- Adfin - Pricing (accurate as of October 2026) https://www.adfin.com/pricing
- GoCardless Support Centre - Reconciliation settings in GoCardless for Xero (accurate as of October 2026) https://support.gocardless.com/hc/en-gb/articles/360001286805-Reconciliation-settings-in-GoCardless-for-Xero
