Welcome to our Xero training school! In our inaugural edition, we will show you how to check your Xero file to ensure the file is ready for quarter / year end to send in to your accountant, and to ensure you have a clean set of data so you can rely on your profit and loss report.
One thing that may surprise you is that all good accountants and bookkeepers focus on a report called the balance sheet, and only look at the profit and loss when the balance sheet has been reconciled. In this first edition, we will show you how to ensure your bank has been properly reconciled.
There are three important procedures to follow when ensuring your bank has been reconciled. The process in Xero is very different to that in MYOB and other accounting platforms. Before you get started, you need to run a report called the reconciliation report. You can find this by going to your dashboard, clicking on manage, and then click on reconciliation report.
1. Take a good look at the reconciliation report. The first thing you should note is the statement amount. Does this match the actual statement balance when you log on to your internet banking? If not, chances are that some bank feeds have been missed. This is very common especially when first setting up your file. The bank feeds will start but the transactions that occurred prior to the bank feed starting have not been imported. Give us a call and we can help you fix this up.
2. Are there any transactions in the section titled outstanding payments? These are transactions that have been recorded in Xero but not matched to your bank feeds. As a rule of thumb, you would not expect to see any outstanding transactions, unless there truly is a difference between the date you recorded the transaction in Xero and the date the amount was charged by the bank.
If you do have outstanding amounts, here are some common reasons they would exist:
(a) You have double recorded the transaction, once as a spend / receive money and then again when you coded the bank feed. To fix this you would remove and redo the bank feed coding, then match the bank feed to the source transaction.
(b) the transaction was paid for by a different payment source, i.e. it was paid for personally or by a credit card. To fix this, you must click into the transaction and change the bank account from this bank to the correct source.
When you are finished resolving the transactions, there should be nothing left in this section except for timing issues.
3. Are there any transactions in the section titled un-reconciled bank feeds? If so this means that there are still bank feeds that need to be coded and/or matched. Your bank is not reconciled until all bank feeds have been dealt with and this section should be blank.
After you have worked through each of the above points, and have resolved all issues, your bank is reconciled! Time to move on to the next section of the balance sheet, most commonly the trade debtors section. Stay tuned for edition 2 that will show you how to ensure your debtors are reconciled.
If you would like help getting your Xero file reviewed, and training on how to prepare a month end package in Xero, please do get in touch with our team on 04 266 CLOUD. Our fees and packages are transparent and can be viewed here. Or click here to make an appointment.