Bank Reconciliations in Xero

Hi there, I’m Nick Roberts, I am an accountant who has been working in public practice for the last 12 years. 

I was an early adopter of Xero in 2007, and have been working with this platform  (as well as other accounting systems since). I would like to use my expertise to help people with their use of Xero and other accounting software solutions.

For this blog post I am going to cover bank reconciliations in xero, this is where you code the transactions in the bank account and commit them to the Xero accounting system. The bank reconciliation screen is where you do this.  

How the bank reconciliation screen works

Dashboard

1. On the dashboard, which is the main screen of your Xero, each bank account in your business is represented.
2. Click on the blue button that says reconcile x items for the bank account that you want to reconcile. This will take you to the bank reconciliation screen.

Bank Reconciliation Screen

1. This shows up to 10 items per page
2. Made up of funds coming into your business and funds going out of your business
3. These can be represented by various different ways 
4. Invoices / Bills / Cash Payments / Cash Deposits 

How to Reconcile Each Type of Transaction

Invoices  

1. Funds that come in for invoices should match with the corresponding invoice
2. However Xero matches Invoices on the $ amount, so ensure that you check other details eg date and invoice number

Bills

1. Funds that flow out for bills should match with the corresponding bill
2. However Xero matches Bills on the $ amount, so ensure that you check other details eg date and bill number. 

Cash Payments

1. These are generally paid out for small amounts like bank fees or eating out etc
2. There are multiple ways that you can deal with these
3. Create a bill in the create screen by filling out the following information
   1. Who (Who the other organization is to the transaction)
   2. What (What account the transaction should be coded to)
   3. Why (What the transaction relates to)
4. Use a rule or Memorization (See the next blog post)

Cash Deposits

1. These are generally for deposits / part payments of invoices or prepayments
2.  Use the match screen and find the invoice it relates to, then use the split function. 
3. For prepayments you will need to go to the match tab and create a new transaction
   1. Type receive money
   2.  Received as prepayment
   3. Account Prepayments

Thank you for your time in reading this, if you have any questions or suggestions for future posts please contact me at nick@zero-tohero.com or on 022 405 9312. 

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