How to do a Bank Reconciliation in Xero: Banking Feeds, Match, Create, Transfer, etc.

Introduction

This tutorial will guide you through the process of performing a bank reconciliation in Xero, a popular accounting software. Bank reconciliation is essential for ensuring that your financial records match your bank statements, which helps maintain accurate accounting and financial integrity.

Step 1: Setting Up Bank Feeds

• Access Xero: Log in to your Xero account.
• Navigate to Bank Accounts: Go to the "Accounting" menu and select "Bank accounts."
• Add Bank Feed: Click on "Add Bank Account" and choose your bank from the list. Follow the prompts to connect your bank account to Xero.
• Confirmation: Once the bank feed is set up, transactions from your bank will start to flow into Xero automatically.

Step 2: Reviewing Bank Feed Transactions

• Open Bank Reconciliation: Go to the "Accounting" menu and select "Bank accounts," then choose the account you want to reconcile.
• View Transactions: Click on the "Reconcile" tab to see the transactions imported from your bank feed.
• Check for New Transactions: These are typically displayed at the top of the screen. Review these transactions for accuracy and completeness.

Step 3: Matching Transactions

• Identify Matches: Look for transactions that correspond with those recorded in your Xero account.
• Match Transactions:
  • For transactions that match perfectly, click "OK" or "Match" next to the transaction.
  • If there are discrepancies, you might need to edit or find the correct transaction.

Step 4: Creating New Transactions

• Create a Transaction: If you find a bank transaction that does not have a matching entry in Xero, you will need to create a new one.
  • Click on "Create" next to the unmatched transaction.
  • Fill in the details such as date, amount, and description.
  • Choose the appropriate account for the transaction.
• Save the Transaction: After entering all the relevant information, click "Save" to record the new transaction.

Step 5: Handling Transfers Between Accounts

• Identify Transfers: If you have transfers between accounts, these should also be reconciled correctly.
• Select Transfer Option: Click on the "Transfer" option for the relevant transaction.
• Fill in Details: Enter the necessary details, including the accounts involved in the transfer and the amount.
• Save the Transfer: Once completed, click "Save" to finalize the transfer.

Step 6: Discussing Suggested Matches

• Review Suggested Matches: Xero may suggest matches based on your transaction history.
• Check Suggestions: Click on the suggested matches to verify their accuracy.
• Confirm Matches: If they are correct, select “Match” to confirm. If not, you can choose to create a new transaction or recheck your records.

Conclusion

Performing a bank reconciliation in Xero involves setting up bank feeds, reviewing transactions, matching existing entries, creating new transactions when necessary, and handling transfers. Regularly reconciling your accounts ensures that your financial records are accurate and up-to-date. To further enhance your accounting skills, consider exploring additional Xero tutorials or advanced courses related to bookkeeping and accounting.