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With this step-by-step guide, you can learn how to reconcile in Xero. We've also included handy tips to speed up your reconciliation process whilst accurately matching your transactions to payments.
Contents:
Reconciling means matching the transactions you've recorded in your accounting software with the transactions in your bank statements. In this guide, we explain how to do this if you're using Xero accounting software.
This practice is crucial for maintaining accurate financial records and helps to identify any discrepancies, such as missing invoices or incorrect payment amounts. By regularly reconciling your accounts, you can ensure that your financial statements reflect the true state of your business finances, enabling you to make informed decisions and comply with regulatory requirements. Another huge benefit of frequent reconciliation is more accurate data, essential when using Xero apps such as Telleroo, Float, Fathom and Chaser!
Once you're logged into Xero, go to Accounting > Bank Accounts.
You should now see all the bank accounts you have added to Xero. Each bank account will show two balances:
Directly below, you'll see the button Reconcile X items, so you can begin reconciling and can work to match up these two balances.
You'll now see a list of all your bank statement lines that need to be reconciled.
Xero will try to find a statement line that matches a transaction you've already created in Xero. Invoices you've created for money received, Bills you've added for money spent.
Where Xero thinks there's a match, you'll see the transaction highlighted in green. Make sure to double check the details shown before clicking OK to reconcile. This transaction will then disappear from your screen. You can edit these details before pressing OK.
Xero might find more than one possible match. It will select the most likely transaction, but be sure to double check this manually - and look at the other possible matches.
If Xero cannot find a match, it might make a prediction shown in highlighted text. You can finish adding the transaction by pressing Add details before reconciling.
If Xero cannot find a match, and does not make a prediction, the transaction on the right will appear empty. You can either:
Telleroo Tip: Are you tired of wasting time searching for and matching individual payments? When you send payments using Telleroo, we connect with your Xero account, telling Xero which transactions to match. Goodbye manually finding transactions 👋 and hello to one-click reconciliation!
If you have made a bulk payment manually via your bank, you will follow the same steps as you would for a single payment. The only difference is that you'll need to select multiple invoices in Find & Match .
Bulk payments can significantly reduce the time spent on making supplier and payroll payments. However, this efficiency may lead to added complexity and potential confusion during the reconciliation process. Without a clear record of what has been sent, to whom, and when, matching transactions can become both challenging and time-consuming.
Telleroo Tip: Reconcile bulk payments with speed using Telleroo. 🚀In just one statement line, we'll tell Xero which invoices make up the bulk payment. So you can reconcile a pay run for 200 invoices in a single click! Here’s how it works.
Making partial payments to suppliers has never been simpler. You have the option to link a partial payment to an outstanding bill in Xero, streamlining the process.
Using Find & Match, select the transaction you need to amend and click Split.
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Enter the amount for the part payment, and Xero will calculate the remaining balance to be paid. Click Split.
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Xero will separate this transaction into two lines. You'll see one line for the part payment, and one for the remaining balance to be paid. Click Reconcile.
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Telleroo Tip: Eliminate manual data entry! 🎉 When you make part payments in Telleroo, we'll automatically split the transaction in Xero for you. Allowing you to reconcile with just a single click!
You might need to make adjustments for statement lines and transactions in Xero to match.
In Find & Match, look for Adjustments. Here, you can make two types of adjustments: bank fees and minor adjustments.
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Select Bank fees to correct any charges from a bank or payment provider, where you wish to reallocate the costs to another account. For example, if they are to be covered by an accountant or bookkeeping partner. Add all details including the account that these charges should be allocated to. Click Reconcile when you have matched correctly.
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Telleroo Tip: With Telleroo, you won't see any fees for GBP transactions in Xero. That's because we cover our fees in your monthly subscription, where you pay for the number of payments you've sent in a calendar month. If there's a change in the number of payments you send, we'll automatically adjust your package (lower or higher) to suit your needs.
If you need to make a small change like writing off a rounding error, select Minor adjustment. Enter the amount you'd like to adjust, and click Reconcile when you have a match.
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For international payments, you'll go to the same sections as GBP and follow the usual process.
However, if you have a transaction involving a foreign currency exchange, you may need to update the exchange rate and any charges. For instance, if you converted and sent an international payment via a UK bank account, your bank or payment provider will have handled the currency conversion for you - but at a certain exchange rate and with their fees.
It is essential to manually input the exchange rate for transactions. This action will override the estimate provided by Xero, helping to prevent any discrepancies. Here is an article on how to update per transaction, or by date range.
You can adjust the transaction fees from your bank or payment provider using the standard process during reconciliation.
Telleroo Tip: Make international payment reconciliation a breeze with Telleroo! No need to fiddle with exchange rates—every transaction, along with fees, is automatically sent back to Xero in GBP. Enjoy quick and accurate reconciliation in just one click!
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If you have made a payment for an invoice or bill not yet created, you will need to add a prepayment in Xero. Within Reconciliation, press Create and Add details.
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You will either see Received as or Spent as, depending on the type of transaction. Click the dropdown next to this, and select Prepayment.
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Xero will automatically add the details from the transaction, but you can edit them if needed. Once you're happy, click Save transaction. Finally, click Reconcile for the prepayment.
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