How to Reconcile in Xero

Reconciling your bank statements is an essential part of maintaining accurate financial records and ensuring the integrity of your accounting system. Xero, a popular cloud-based accounting software, makes this process relatively straightforward. Here’s a step-by-step guide on how to reconcile in Xero.

Read more: What Is Xero?

Why Reconcile Your Bank Statements?

Before we dive into the how-to, it’s important to understand why reconciling your bank statements is essential. Here are a few key reasons.

Accuracy

Reconciling ensures that your financial records match the reality of your bank account, helping you identify any discrepancies or errors.

Audit Trail

It provides an audit trail that can be useful for internal audits or when dealing with external auditors.

Financial Health

Regular reconciliation helps you keep track of your company’s financial health by ensuring all transactions are accounted for.

Preparing for Reconciliation in Xero

Before you start reconciling, make sure you have the following ready.

Latest Bank Statement

Have the most recent bank statement from your bank.

Correct Date Range

Ensure that the date range on your bank statement matches the period you are about to reconcile in Xero.

All Transactions Entered

Make sure all transactions for the period have been entered into Xero.

Step-by-Step Guide to Reconciling in Xero

1. Navigate to the Reconciliation Page

• Log in to your Xero account.
• Click on “Accounts” from the top menu and then select “Bank Accounts.”
• Choose the bank account you want to reconcile from the list.

2. Select the Reconciliation Period

• Click on “Reconcile” next to your selected bank account.
• In the reconciliation window, select the correct statement period using the “From” and “To” dates. These should match those on your latest bank statement.

3. Enter the Statement Balance

• Enter the closing balance from your bank statement into Xero’s “Statement Balance” field.
• Note that this balance should be as of the end date of your selected period.

4. Review and Match Transactions

• Xero will display a list of transactions for the selected period.
• Match each transaction in Xero with its corresponding entry on your bank statement:

     – If a transaction matches exactly, tick it off by clicking on it.

     – If a transaction does not match (e.g., due to multi-line transactions or adjustments), you may need to make adjustments or split transactions accordingly.

5. Handle Unmatched Transactions

If there are any unmatched transactions (highlighted in red), you’ll need to investigate why they haven’t been matched:

• Check for typos or incorrect dates.
• Verify if any transactions were missed in either Xero or on your bank statement.
• Make necessary adjustments such as editing dates or adding new transactions.

6. Finalise Reconciliation

• Once all transactions have been matched and any discrepancies resolved, click “OK” or “Reconcile Now.”
• You will see a confirmation message indicating that your account has been successfully reconciled.

Tips for Smooth Reconciliation

Regular Reconciliation

Reconcile regularly to avoid accumulation of discrepancies which can become difficult to resolve over time.

Use Auto-matching Features

Xero offers auto-matching features that can significantly speed up the reconciliation process by automatically matching known payees and known types of transactions.

Document Everything

Keep records of each reconciliation session including notes about any discrepancies found and how they were resolved.

At Griffiths Advisory, we understand that effective financial management is vital to your business’s success, and reconciling your bank statements is a key component of this process. Our team of experts is here to support you with seamless Xero integration and reconciliation strategies tailored to your specific needs. Contact us today to ensure your financial records are always accurate and up-to-date.