Bank Reconciliations in Xero

One of the key benefits in Xero is the Bank Feeds function, it produces a massive saving in time, complexity and accruacy.

The first step in accounting for small business is accounting for the transactions that go through the business bank account.

In other accounting systems, the bookkeeper would enter in each item on the bank statement into the accounting system. This process was time consuming (entering the date, amount and payee) and susceptible to human error. If the bookkeeper entered an payment or receipt incorrectly, the bank reconciliation would not balance and it would take considerable time to find the wrong entry.

Xero imports the transactions from your bank on a daily basis, so you don’t have to enter the details of the payment, you just have to allocate it to an account code.

This video is provides an overview of how to process a number of different types of transactions in Xero including:

  • Receipts in sales invoices
  • Payments to payables invoices
  • expenses
  • part-payments

Transcription

Xero imports the transactions from your bank on a daily basis, so you do not have to enter the details of the payment; you just have to allocate it to an account code.

We are going to look through how to reconcile your bank account and in this instance we have six items remaining and Xero will automatically try and match the receipts it can find to outstanding invoices or transactions that have happened before.

In this case there is one for Ridgeway University and it automatically allocated it to the invoice we can see the invoice number is the same; the amount is the same so we are fairly confident that it is right. If it is not we can go into the “Find and Match” and just make sure – particularly if you have the same amount invoices going out each time. So we can just hit ‘okay’.

In this instance there is an account payable invoice and Xero has automatically found that The Truckston Property Management accounts payable invoice has been entered so we can just click “okay”.

In this case Xero does not know what it is and so Smart Agency we are going to say it is for advertising and we will put in Smart Agency here and it will automatically come up.

Xero will start to remember these. There is another option here where it says I don’t know where to allocate this to so we can click ‘Find and Match’ and we can type in City Limousines and it will bring up the two invoices which are outstanding.

What we want to do is allocate it to the earliest invoice so we will client the little box here and click ‘Split’ and we will allocate $100 there for that old invoice and it will show there is still $150 outstanding on that and then click ‘Reconcile’.

Xero will automatically remember transactions which have happened in the past, so we have these bank fees that have gone through, so it will remember we have NAB bank fees, so click ‘’Okay” and again ‘Account Fees’ okay.

So there it is, you have reconciled all the accounts. You then go back to the dashboard you will see the account has been reconciled. This is the process you have to go through to reconcile the bank statement.