A point to remember in Xero is that although your bank transactions are downloading into Xero, you should still monitor the balance of your bank accounts. This is easily achieved by running a Bank Reconciliation report. This report will show up any payments or receipts that have been manually added but not matched to any bank transactions. These will show on the Bank Reconciliation as outstanding payments and deposits. Quite often these entries may have been duplicated when processing the bank transactions and have not been matched with the ‘spend money’ or make deposit entries which have gone through the bank account.
Another entry which affects the balance of the bank account is the conversion balance entry. Care should be taken when entering this amount that all bank transactions after the conversion date have been processed in Xero. When downloading of the bank transactions commences, occasionally a transaction may not download, so checking the statement to ensure all transactions are captured can save a problem later on.
When you look at the dashboard in Xero you will see on the bank accounts the balance in Xero and the statement balance. The difference in these two amounts should be the transactions which have not yet been reconciled in Xero. These entries will show on the Bank Reconciliation report as unreconciled entries.
It is also good practice to check the actual bank statement on a regular basis to ensure it agrees with Xero
By monitoring the bank account balances you can avoid the time consuming task of having to go back and adjust prior transactions and also avoid not having true and correct reports which can affect your BAS and annual accounts figures.
This article appeared in the November 2016 newsletter.