Ready to reconcile?

This tutorial shows you how to do a quick and easy bank reconciliation using Xero.  I love this feature!  I think it is the best  thing ever and was probably one of the biggest selling points when I chose to work with Xero in my practice.

Why do you have to reconcile?  It is really important and this is why:

  • Lets you see what money you have available in your bank account
  • Lets you see who owes you money and how overdue their invoices are and whether further action is needed
  • Lets you see who you owe money to and when its due
  • Indicates any errors that may have occurred in the bookkeeping in relation to payments of invoices to specific bank accounts.

What is reconciling?

Simply the process of matching what happened in your bank account agrees to the bank activity you have entered into Xero.

 

What is the difference between the Xero Balance and the Statement Balance?

Statement Balance = Actual Bank Statement Balance (the most important balance between the two)

Xero Balance = All the transactions posted in Xero to the bank account set up in Xero.

Check out how easy it is to reconcile in Xero

There are a few things to get familiar with:

  1. Set up your bank feeds
  2. OKie Dokie Button
  3. Find and Match
  4. Bank Rules
  5. Discuss
  6. Transfer
  7. Account Transactions
  8. Reconciliation Report

 

Setting up your bank feeds

Before you can even start doing a bank reconciliation (or updating your bank activity for the non-accountants who may be reading this) getting your feeds set up is necessary.  You can also import your transactions into Xero from a CSV download from your bank account. Check out my video showing you how to format a csv downloaded statement to import into Xero HERE

OKie Dokie Button – Warning don’t get to happy with this!

Once you get all your transactions into your bank account either via import or bank feed you will need to begin the reconciling process or the matching to your Xero activity process.  Below is a screen shot of how the transactions will appear:

Screen Shot 2015-04-17 at 15.18.08

 

 

 

 

This is the exciting bit because this is how you can reconcile your bank in minutes!  The items on the left of the screen are your current bank activity

The items on the right are what you have entered into Xero awaiting action.  In the example above the top line is a customer paying an invoice.  The item to the right Xero is requesting you to confirm that the money in the bank is a match to the invoice lit up on the right in Green.  Take a look, decide if this is really a match then hit OK (OKie Dokie).  Xero will then move that line of your bank reconciling screen and show that customer invoice as paid in Xero.

The second example is a bill that has been paid out of the bank.  The payment lit up in green on the right is a result of you/your bookkeeper telling Xero that the bill was paid on 19/3.  Xero is requesting if the two “payments” are a match.

Warning bit – don’t press the OK button until it is really a match!

 

Find & Match

As with the example above Xero tries to help make the reconciling quicker by find a match for the activity in the bank with activity you have posted in Xero.  The items lit up in Green are possible matches.  If you don’t think they are a match click on the Find & Match button and use the search boxes to look for your match.  You can search by amount, name or invoice no.

 

Bank Rules

Bank rules is another great way to speed up your reconciling.  You can create rules for transactions when they come through you feed telling Xero how you want transaction to be treated.  For example when bank charges come through you can tell Xero you want anything coming from eg. HSBC posted to Bank Charges with the name HSBC.  Apply by clicking OK and that line will be reconciled and posted to Bank Charges in your accounts.

Discuss

Screen Shot 2015-04-17 at 16.23.15

 

 

 

This is another really cool feature particularly if you are a bookkeeper or use a bookkeeper or accountant to help with your Xero bookkeeping.  Leave a message next to the bank activity for them here if you are not sure what the transaction is for or perhaps you need the paperwork.  Saves you time from having to send emails all the time.  You can also use this box to remind you about having to locate more information or the reason you couldn’t reconcile this line at the moment.

 

Transfers between bank accounts

You have the option of transfers between bank accounts.  Just simply go to the TRANSFER button on the box on the right hand side of your bank reconciliation screen as shown below and choose the bank account you are transferring the money to or from.  Please note you only have to make the transfer in one of the related bank accounts NOT both!  Doesn’t matter which one you choose to reconcile first just ensure you only do the transfer in one account.  It will automatically match up when you reconcile the corresponding account.

Screen Shot 2015-04-17 at 16.32.43

 

 

Account Transactions

The Account Transaction screen which is found under Manage Account – Account Transactions is where all these reconciled items will be once you press OK.  You can search by name, amounts, references etc.  The important thing to remember about this screen is the only items you will find in here are items you have entered in this account.  Anything that is still sitting on the left hand side of your bank reconcile screen will not be in here or reflected in your reports until they are OK’d.

Reconciliation Report – A very important report

Finally to check all your reconciling is correct you must run this report after finish.  This report will compare what your Xero Balance is (all items that have been posted to this bank account vs unreconciled bank activity and Actual Statement Balance.)  It will tell you why the Xero Balance and the Statement Balance do not match up.  Check the items listed and if they are all fine then you can feel confident that account has been reconciled properly.

 

Need any help with Xero Set Up, Conversion, Training?  I am passionate about getting everyone using Xero and loving it as much as I do!  Xero gives back your time to spend doing the things you love in your business or spending more time with family and friends.