Bank reconciliation protects your business from fraud, accounting errors, and mismanaged funds. At a minimum, it’s best to reconcile your bank and bookkeeping records daily, weekly, or monthly to catch errors immediately. It can be a tedious process. Nonetheless, it’s critical to your financial health.
Good thing, Xero accounting software can make this process easier for you. Follow these steps on how to do bank reconciliation in Xero.
Here are the ways to reconcile your accounts using Xero accounting software.
Connecting your bank automatically imports your bank transactions to this software every day.
To double-check if your bank is connected to Xero, you must see a panel named “Business Bank Account”.
There are four ways to do bank reconciliation in Xero: match, create, transfer, and discuss.
Note: Your bank statement lines appear on the left side of your screen while your Xero (business) transactions are on the right side.
You can use this option to match your bank statement to an existing Xero transaction. Some of the examples of existing Xero transactions are bills, invoices, payment transactions, and expense claims.
To match transactions, compare your bank statements against your Xero transactions.
If a bank statement appears but it doesn’t have a corresponding Xero transaction, you can use the create option to reconcile.
If you transfer money from one bank account to another, you can use the transfer option. It lets you track how your money moves between your bank accounts. This applies to the bank accounts you set up in Xero.
To reconcile your bank transfer, click the “Transfer” tab then select which bank account you transfer your funds to or from. Click “OK” to reconcile.
Meanwhile, the “Discuss” tab is for bank statement lines that you don’t know how to reconcile. Using this feature, you can start a conversation with your accountant or bookkeeper about the transaction.