Handling Bank Charges During Reconciliation in Xero

Xero: Handling Bank Charges During Reconciliation

Introduction

When reconciling transactions in Xero, you may occasionally find that the amounts on your bank statement do not exactly match the transactions recorded in Matters.Cloud and synchronised to Xero.

This difference often arises due to bank charges or payment provider fees (such as those from Stripe, PayPal, or other payment gateways). To ensure your accounts remain accurate and your Matters.Cloud data reflects the correct financial position, these adjustments should be made directly in Xero.

This article explains how to record and manage bank charges or payment provider fees in Xero during the bank reconciliation process. Following these steps ensures your financial data in Xero and Matters.Cloud remains accurate and aligned.

Understanding Adjustments in Xero

Xero provides an option to add adjustments during the bank reconciliation process. Adjustments help align your bank statement lines with the corresponding transactions in Xero when minor discrepancies exist.

The two main types of adjustments are:
  1. Bank fee: used to record charges made by your bank or payment provider.
  2. Minor adjustment: used for small rounding differences or other immaterial discrepancies.
By recording these adjustments correctly, you maintain accurate reconciliation records and ensure your financial data remains consistent across both Xero and Matters.Cloud.

Making Adjustments When Reconciling in Xero

To make adjustments during reconciliation in Xero:
  1. Go to the Bank Reconciliation screen in Xero.
  2. Locate the relevant statement line and click Find & Match.
  3. Select the matching transaction (for example, the invoice).
  4. At the bottom of the matching screen, click Adjustments.
  5. Choose the type of adjustment you need:
  1. Bank fee – to record bank or payment provider charges.
  2. Minor adjustment – to correct small differences due to rounding or other factors.

How to Add Bank Fees (or Payment Provider Fees)

Follow these steps to record bank or payment provider charges in Xero:
  1. Select Bank fee under the Adjustments menu.
  2. Enter the following details:
  1. The amount of the fee.
  2. The account where the fee should be allocated (for example, Bank Charges Expense).
  3. A clear description for reference, such as “Stripe transaction fee” or “Bank service charge”.
       3. If the charge should be reallocated (for example, if covered by an accountant or bookkeeping partner), select the appropriate account.
       4. Review the details and click Reconcile to complete the adjustment.

Recording fees in this way ensures your Xero reconciliation matches your actual bank statement, and that all related costs are accurately categorised for reporting purposes.

Matters.Cloud Integration Notes

  1. Adjustments such as bank or payment provider fees should be made within Xero, rather than in Matters.Cloud.
  2. Once reconciliations are completed in Xero, these adjustments will be reflected when you next synchronise Matters.Cloud with your Xero account.
  3. Keeping reconciliations up to date in Xero ensures your financial summaries and reports in Matters.Cloud remain accurate.
This process helps maintain a clear link between your billing, accounting, and reporting data across both systems.

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