Reconcile Your Bank Account

This article is for small businesses who use Xero.

Overview

• Review imported bank statement lines and match them to transactions in Xero to make sure your accounting records are up to date.

Step 1: Prepare to reconcile

1. Understand how bank reconciliation in Xero works before you reconcile any transactions.

2. Make sure you've entered all the transactions into Xero. These might include invoices, bills, credit notes, expense claims, or cash transactions.

3. Check the opening balance of the bank account is correct and the statement balance in Xero matches the balance in your actual bank account.

Step 2: Review the bank account

When a bank statement is imported, the bank account panel on the dashboard shows the number of bank statement lines ready to be reconciled. If a bank account doesn’t show on your dashboard, in the Accounting menu, select Bank accounts.

For the bank account you want to reconcile, click Reconcile [number] items.

If Reconcile [number] items doesn’t display, it indicates there are no bank statement lines to reconcile. If you think there should be statement lines to reconcile but there aren’t any, it might be because:

• The statement lines relate to dates before a bank feed was connected, or a bank feed isn’t available. If this is the case, you need to manually import the bank statement lines.

• The bank feed is delayed.

The bank statement lines display on the left hand side of the Reconcile tab. For each individual bank statement line, work through the steps below to reconcile it against an account transaction.

Your aim is to match each statement line in the bank account to an existing transaction in Xero, or create a transaction during the reconciliation process.

Step 3: Match to an existing transaction in Xero

If an existing transaction has already been created in Xero that relates to the statement line, the bank reconciliation process is simply matching the two.

Existing transactions might include sales and purchase documents such as invoices, bills, expense claims, payment transactions or spend and receive money transactions.

If the bank statement line relates to a transfer of funds from one bank account to another, you only need to create the transfer transaction in one account. If you’ve already created the transaction in the other account, just click OK to reconcile it.

Accept a matched transaction

Xero first generates a list of possible account transactions to match against the statement line. These matches are made by comparing all the information in the statement line against all the information in the account transaction. The account transaction that has the most similarities to the bank statement line is offered as the suggested match. If there are multiple transactions that match, Xero looks for the one with the closest due date.

Sometimes there are multiple transactions that match, so the most likely transaction is suggested and a link is provided to the other alternatives.

• If the correct transaction is suggested, click OK to accept the match and reconcile.

• If you don’t want to accept the match, click [number] Other Possible Matches Found to see other options.

  

Find and match

If you know a transaction has been created in Xero but it’s not showing up as a suggested match, use find & match to search for the correct transaction.

Step 4: Create a new account transaction

Where a transaction doesn’t already exist in Xero that relates to the statement line, create the transaction during the bank reconciliation process.

Transactions can be created by accepting suggestions or using the Create and Transfer tabs.

Accept a suggested transaction

To help you reconcile, Xero suggests account transactions to match with the bank statement lines. The suggestions are based on bank rules you’ve set up, or similar transactions that have previously been reconciled.

Suggested by a bank rule

If Xero can’t match an existing account transaction to the statement line, we look to the bank rules set up. If the bank statement line matches the conditions of a bank rule, we’ll suggest creating a transaction in line with the rule.

• If the correct bank rule is applied, click OK to accept the match and reconcile. If you need to update any of the transaction details first, click View details.

• Click Don’t apply rule to reconcile another way.

If a bank rule has been set up but it wasn’t suggested for the bank statement line, check the rule conditions are set correctly.

Based on a transaction previously reconciled

If there’s no existing account transaction or bank rule to apply and you’ve selected Suggest previous entries, Xero uses memorisation to suggest a transaction to create.

Memorisation is based on previously reconciled transactions with the same amount and similar payee, particulars and reference details. We suggest the Who, What and Why so the transaction is ready to reconcile.

• Click OK to accept the suggestion and reconcile. If you need to update any of the details first, click View details.
• If there are no similar transactions, or the suggestion is incorrect for this statement line, create a spend or receive money transaction. 

 

Tip

To turn memorisation on or off, select or clear the Suggest previous entries checkbox at the bottom of the bank reconciliation screen.

Create a cash transaction

Create a spend or receive money transaction to record a new cash transaction during bank reconciliation.

Create a transfer transaction 

Create a transfer money transaction to record the movement of funds between your bank accounts in Xero.

You only need to create a transfer transaction in one bank account. Xero creates the transaction in the corresponding account, so you just need to click OK to reconcile it.

Step 5: Discuss it with your advisor

If you're unsure what a bank statement line relates to, start a conversation with your adviser or other users in your organisation. When reconciling, enter a comment in the Discuss tab to start a discussion.