Xero Reconcile Bank Statement Workflow for Bookkeepers

To reconcile a bank account in Xero so it agrees with the real bank statement, match every imported statement line to a transaction on the Reconcile tab, then run the Bank Reconciliation Summary as at the statement date and enter the PDF's ending balance. When the calculated balance is out by nothing, Xero and the statement agree.

How does Xero match statement lines to transactions?

Xero matches each imported bank statement line to an account transaction already in Xero, or helps you create one. A statement line is one transaction the bank reported, arriving through a bank feed or a manual import. On the Reconcile tab, statement lines sit on the left and Xero's proposed match or new transaction sits on the right.

Xero's Reconcile your bank account guide describes the order Xero works in. First it looks for an existing transaction, such as an invoice payment, a bill payment or a spend money entry, by comparing every detail on the statement line with every detail on the transaction. The closest one is offered as the suggested match, and when several fit, Xero prefers the one with the nearest due date and links to the alternatives.

If nothing existing fits, Xero suggests a new transaction instead. The guide lists three sources for that suggestion, in this order:

1. A bank rule whose conditions the statement line meets.
2. Memory of previously reconciled lines with a similar payee, particulars and reference, when "Suggest previous entries" is selected.
3. A prediction of contact and account code from the statement line's details, shown in italics.

Accepting a suggestion is a click on OK. Before clicking, read what Xero is proposing. A memory suggestion that codes this month's payment to the same account as last month's is helpful until the vendor changes what it bills for.

When the right transaction exists but is not suggested, use Find & Match to search for it. This matters most for invoice and bill payments. Xero's article Why are the Statement Balance and Balance in Xero different? notes that duplicate transactions often arise during bank reconciliation, when transactions are created to match statement lines instead of finding the ones already entered.

Transfers between the client's own accounts have their own tab. On the Transfer tab you pick the other bank account, and Xero creates the matching entry there, so the other side only needs an OK when you reconcile that account. The post on reconciling multiple bank accounts covers pairing transfers across a client's checking, savings and loan accounts.

If you cannot tell what a line is, the Discuss tab lets you leave a comment for the client or a colleague. That keeps the question attached to the line instead of in an email thread.

Statement balance versus balance in Xero

Every Xero bank account shows two figures: the Statement Balance and the Balance in Xero. The Statement Balance is the opening bank balance plus every statement line imported. The Balance in Xero is the opening bank balance plus every account transaction entered. They measure different things, so they differ whenever one side has an item the other lacks.

Xero's article Why are the Statement Balance and Balance in Xero different? gives the two common reasons. An account transaction exists in Xero but its statement line has not been imported yet, or a statement line has been imported but no transaction was created for it. The Balance in Xero is the figure that appears on the Balance Sheet, so a gap between the two affects the client's reports.

The date beside the Statement Balance is the date of the last imported statement line. Xero notes that it does not move when a feed refreshes without bringing in anything newer, so a stale date tells you the feed has not delivered recent lines.

Xero's fix runs in a set order:

• Check the Statement Balance first, against the balance the bank actually shows for the same date.
• Once it is right, reconcile every statement line on the Reconcile tab.
• If the two still differ, open the Account Transactions tab, sort by status and look at what remains unreconciled.

Some difference is normal. Future-dated transactions, such as a scheduled payment entered ahead of time, keep the figures apart until their lines arrive in the next statement or two. A difference that does not shrink as statements arrive is different. Xero says that if there are unreconciled transactions you thought were reconciled, you might have created duplicates during reconciliation, often by making a new transaction instead of finding the one already entered. Its suggested tool for finding them is the Account Transactions report, and its fix is Remove & Redo on the duplicate.

Neither figure is the bank statement itself. A feed can drop or repeat lines, which is why the post on why the bank statement is the source of truth for reconciliation treats the statement as the final check.

How do you check Xero against the PDF bank statement?

The Bank Reconciliation Summary, part of Xero's Bank Reconciliation report pack, checks Xero against the PDF bank statement. Run it as at the statement's closing date, type the PDF's ending balance into the Bank statement ending balance field, and read "Calculated balance out by." Zero means Xero's imported lines add up to what the bank says.

Xero's Bank Reconciliation reports article gives the path. In the Reporting menu, select All reports and open the Bank Reconciliation pack. Choose a pack date range ending on the statement date, select the bank account, enter the ending balance and click Update. You can also open it from a bank account's menu with Reconciliation Report.

The summary's totals each answer a different question:

• Balance in Xero is the sum of bank transactions dated on or before the report date.
• Total Outstanding Payments/Receipts are transactions entered but not reconciled.
• Total Unreconciled Statement Lines are lines imported but not reconciled.
• Statement balance (calculated) is the sum of imported statement lines, built from Xero's data rather than the bank's.
• Calculated balance out by is the gap between the ending balance you typed and the calculated statement balance.

The pack's other two reports help when the summary is out. The Bank Statement report lists each line with its date, import date, reconciled status and source. The Statement Exceptions report shows deleted lines, lines created by marking a transaction as reconciled, and lines Xero has identified as potential duplicates.

A month-end check against the June PDF

This example is fictional. Kestrel Landscaping (example client) keeps checking account XXXX-7316 in Xero. Its June PDF statement closes on June 30 with an ending balance of $42,118.07. The bookkeeper runs the Bank Reconciliation Summary as at June 30.

Every line is reconciled, yet Xero's calculated statement balance is $480.00 above the PDF. The Statement Exceptions report shows two June 18 deposits of $480.00 from the same customer flagged as potential duplicates, and the PDF shows only one. The extra line had been reconciled to a second receive money transaction created just to match it. The bookkeeper deletes the extra line, removes that transaction with Remove & Redo, and reruns the summary: out by $0.00, with the Balance in Xero down to $40,912.67. The $1,205.40 of outstanding payments is two checks written on June 29 that cleared in July, which is the normal gap between the books and the bank.

When the summary is out for a month and you do not know when it started, Xero's article on comparing the statement balance to your actual bank balance suggests running it month by month from the last date the balances agreed, then narrowing within the month that fails. That only works if you have every PDF for the period. Schema CPA reads the client's statements and checks that each closing balance carries into the next month's opening balance, so a missing month shows up before you start comparing.

Duplicate Xero statement lines after a feed reconnect

A duplicate Xero statement line is the same bank transaction imported twice. Xero's comparison article lists it among four errors that knock the Statement Balance out, with a missing line, a line deleted in error, and a manual line from marking a transaction as reconciled. Check for doubles after a feed reconnect or an overlapping file import.

Find the doubles before deleting anything. The Statement Exceptions report lists lines Xero has identified as potential duplicates and whether each was deleted. The Bank Statement report shows each line's import date and source, so two identical lines with different import dates, or one from a feed and one from a manual import, stand out. For a long month, Xero's article suggests exporting both the Xero statement and the bank's statement to a spreadsheet and comparing them line by line.

Then confirm against the PDF. Two identical charges on the same day can be real, such as two equal fuel purchases. Delete a line only when the bank statement shows the transaction once.

Xero's Delete or restore a bank statement line article covers removal:

• For an unreconciled duplicate, on the Reconcile tab click Options on the line, select Delete statement line, choose a reason and click Delete.
• For a duplicate that is already reconciled, or several at once, open the bank account's menu, select Bank Statements, choose Statement lines from Showing, tick the lines and click Delete.

Xero warns that deleting a statement line changes the Statement Balance, so only delete true duplicates. When you delete a reconciled line, Xero reverts its matched transaction to unreconciled; if that transaction was itself created only to match the duplicate, remove it with Remove & Redo. Deleted lines are never fully gone and can be restored from the same Statement lines view. If a whole statement file was imported twice, Xero lets you delete the entire statement instead of line by line.

Manual lines cause a related double. Marking a transaction as reconciled when its line could not be imported creates a manual statement line, and importing the real line later produces a duplicate. Xero's fix is to delete the manual statement you created.

Unreconciling a Xero transaction safely

Unreconciling a Xero transaction removes the link between an account transaction and a statement line while keeping both in the bank account. Xero's Unreconcile an account transaction article says the transaction stays on the Account Transactions tab and the line stays on the Bank statements tab. You then reconcile the line again to the correct transaction.

The steps are short. In the Accounting menu, select Bank accounts and click the account. Find and open the reconciled transaction, click Options, select Unreconcile, then click OK. Xero requires the administrator role or the standard role with bank accounts access.

Unreconciling is the right fix in one situation: a real transaction reconciled to the wrong statement line. Xero's article says to reconcile the line again afterwards, using Find & Match if Xero does not suggest the correct transaction.

It causes more trouble in three others:

• A duplicate transaction. Xero's tip is to delete the duplicate account transaction, not unreconcile it. Unreconciling leaves the extra transaction sitting in the account.
• A manually reconciled transaction. If the line was created by marking the transaction as reconciled, unreconciling deletes that manual statement line too, which changes the Statement Balance.
• A closed period. Unreconciling a line from a month already reported to the client reopens figures someone has relied on. Rerun the Bank Reconciliation Summary for that month afterwards to confirm it still agrees with the PDF.

Work from the statement outward. Before unreconciling, know which PDF line the transaction should match and what the summary should show once it does. That keeps a fix in one month from becoming a new difference in the next.

Card accounts follow the same matching logic with their own wrinkles; see how to reconcile credit card statements. For moving statement data between Excel, CSV files and accounting software, browse the QuickBooks, Xero and Excel category. Schema CPA has no Xero connection; it exports what it reads from statements to Excel or CSV, and the document types it reads are listed on the homepage.