Xero Reconciliation

This step-by-step guide walks you through reconciling payments in Xero using a suspense or clearing account. It covers how to set up accounts in Xero, configure them in the Alternative Payments dashboard, and complete bank reconciliation for deposits. Following these steps will help you accurately match bank transactions to invoices and keep your financial records well-organized.

Bank Reconciliation in Xero

This guide walks you through reconciling a single bank deposit in Xero. In this example, we’ll match a $100 deposit to two invoices: one for $70 and another for $30. This demonstrates how to align a single bank transaction with multiple invoices in your accounting system.

Setting Up Your Accounts

Create a Suspense or Clearing Account in Xero

• This account must not be of the "Bank" type. Consult your accountant to determine the best account type for your needs.

• Use this account to temporarily record payments, enabling you to mark invoices as paid before the funds are transferred to your bank.

• Ensure payments are enabled for this account.

Configuring Accounts in the Alternative Payments Dashboard

In the Alternative Payments dashboard, you’ll assign three types of accounts:

• Payments Account: Select the "Undeposited Funds" account (also known as a suspense or clearing account). This temporarily holds payments until they are reconciled with your bank account.

• Deposits Account: Choose the bank account where Alternative Payments will deposit your payouts.

• Fees Account: Assign an account to track fees if you absorb them on behalf of your customers. If no account is selected, we’ll create one for you, labeled Alternative Payment Fees, to ensure proper recording of all fees.

Bank Reconciliation Workflow

Step 1: Recording Payments When a customer makes a payment, we will immediately send the payment and record it to the Undeposited Funds account.

In this example, two invoices are paid:

• Invoice 1: $70

• Invoice 2: $30

The total payment of $100 is reflected in the Undeposited Funds account. At this stage, no reconciliation is needed, as the payout hasn’t yet been deposited into your bank.

Step 2: Recording the Deposit When Alternative Payments sends the payout, the $100 is transferred as a Receive Money transaction from the Undeposited Funds account to your bank account.

Step 3: Performing the Bank Reconciliation Once the deposit appears in your bank, you can reconcile it in Xero by matching the bank transaction to the invoices's Receive Money transaction. This ensures your accounts are properly aligned.

By following these steps, you can streamline your reconciliation process and maintain accurate financial records. If you need further assistance, don’t hesitate to reach out to our Customer Experience team at [email protected] or by sending us a message via the Live Chat within your partner dashboard.

Love our platform? Rate us on Channel Program and check out our Referral Program page!