Hey - it's Patti Scharf, CPA and co-founder of Catching Clouds, the leader in
e-commerce accounting, and today I'm going to walk you through how to do bank
reconciliations using Xero bank feeds. Watch until the end so that you can
get a free copy of our ebook, Ecommerce Security: Best Practices for
Security in a Virtual World. Now let's get started with step one. Okay, so step
number one is to set up your bank feeds. We're gonna start from here.
We're going to click on get bank feeds. When we do that, it's going to ask for
our username and password. We will fill those in and click Next. Then it's going
to take a couple of minutes to connect, and when it's ready, it'll take us to a
new screen. Alright so here we are; we're going to pick the matching bank feed and
if we check this box, it allows other people to refresh the feed on a daily
basis if they'd like to. I'm gonna leave it unchecked, and then you have to decide
whether you want all the available transactions - usually for banks that
only goes back 60 to 90 days - or you can pick from a specific date. So let's say
I've done the accounting through November and I just want it to start
December 1st. I'm gonna do it like that and click OK, and then it will pull in
all the transactions from December 1st on. All right - so it's going to take me
back to the dashboard where it shows that I have some items to be reconciled,
and that's going to take us to step number two. Step number two - reconcile
your transactions. What you do is you just click on the blue button. This is
going to show you everything that came over from your bank (this is from your
bank), and it wants to know how it needs to go into Xero. At this point, you really
have two options. You can either create the transaction here, or if the
transaction already exists, you can match it against it. So let me show you an
example of each. In the first case the transaction already exists. If you were
to click over to account transactions, this is
everything that's already recorded in Xero. So in this case, this one exists it
was recorded on December 2nd. You'll see it's unreconciled. So it exists, but it
hasn't been matched against anything that came from the bank. That's what
we're doing here when we reconcile. What you can do is just click ok to
match the bank transaction against the Xero transaction. You click OK and
it's done, and if you go over to the account transactions, you'll see that it
now says that it's reconciled. So not only was it entered but it also
got matched against the bank transaction. Now in this case, no other transaction
exists for this. Because we'd already coded something to Costco in the past,
Xero will suggest how it should be coded, but you can overwrite this and code it
however you want to - enter a description, enter a division, whatever tracking
categories, or whatever you want to do, but in this case, I'm just gonna say, "Yep,
that's office supplies." And I'm gonna say "ok," and then when I look at
account transactions, now I see both transactions in there. Ok, so you can
either match it against a transaction that already exists or you can create it
from scratch. Now here's a bonus tip for you. You can set up bank
rules to make things go faster. Let me show you how that works. I'm going to
actually undo what we did - remove and redo. When I do that, it's gonna get rid
of these transactions in Xero, but look - it's still over here under reconcile.
Ok - so we're back to where we started. I'm going to create a spend money rule so
anytime we spend money with Costco, what's gonna happen is the system is
gonna see that, and it's going to suggest - actually more than suggest - it's going to
strongly suggest that a transaction be created with all of this information
that I'm typing in. Ok - and I'm gonna put a note down here that
tips me off to where I'm gonna code this. So this is the rule. What
the rule does is it says, "Okay, Xero, anytime a transaction that comes in from
the bank that goes to Costco, we want to automatically create a transaction set
up that's coded to Costco - and that it's coded to the payee, Costco,
and also has the account, office supplies. So if I go "okay, okay" - if you look over in
account transactions, you'll see both of those transactions exist, and it even has
a memo in it that says office supplies because I told the system to do that. You
can split transactions and do all kinds of funky stuff that I'll show you in
other videos at another time, but suffice it to say that you can automate things
and make things go really quickly and cleanly by using that feature. So we've
reconciled their transactions. Great! Now let's go on to step 3 for a monthly
double check. Okay, so let me just take a second and explain what's happening
right now. When the transactions come down from the bank, and you're creating
the transactions, and you're matching them together, you are reconciling the
transactions on a daily basis. This is different than how it used to be before
cloud accounting. Before bank feeds. The way it used to be is you would just
record transactions on your own doing your own thing, and at the end of the
month - usually like 10 days after the end of the month - in the mail you would get a
paper statement that told you what the balance was, and you would do a manual
monthly reconciliation and make sure that you got everything. Xero has changed
that completely and has turned it on its head so that you're reconciling every
single day. Now there's no need for the end of the month bank reconciliation
that a lot of accountants have have come to know and love.
However, that doesn't mean that you shouldn't double-check your work at the
end of the month. So the next step, step number three, is your monthly
double-check, and honestly, I do this more often than monthly. Usually our team does
it weekly, but just we're just trying to make sure that we're on track. What we
do is we go up to the top where it says reconciliation report and we're gonna
pick the date that we're comparing against the bank. Usually that's at the
end of the month. For credit cards, that might be at the cutoff date which could
be in the middle of the month. In this case, we're going to go take a look at
the end of December, and we're going to see what the balance is according to
Xero at the end of December. Xero seems to think that we've imported this amount,
and there there are no reconciling items.
This makes us all happy but
the way that you know that this number is right is by comparing it to the bank.
So let's look at the bank statement. Okay, here's our bank statement from the Big
Fancy Bank. It has an ending balance of $1,996.38 which is exactly what we have
in Xero, so we know that it matches. Some reasons why it might not match? One could be
you've recorded transactions in Xero that haven't yet cleared the bank.
Another reason it might not match is because there was an error in the bank
feed. Maybe you started the bank feed on the fifth of December but you missed all
the transactions the 1st through the 5th or something like that. Maybe
there was just some kind of technical glitch. The vast majority of the time
when we check it, it's spot-on but you should always do a monthly check
just to make sure. And that brings us to step number four which is protect your
work. After you've gone through, you've reconciled all your bank accounts and
everything, go up to settings and change your financial settings. You can go to
Settings if you don't see Financial Settings under it. Go to General Settings
and that'll take you to the screen that shows you where the financial settings
are. Once you get to financial settings, you lock
the ending date so that there can't be any more changes made to your file. If
I've reconciled everything, and I know that my books are good through the end
of December, lock that so that it won't change it. And I would argue to do both
dates, even this bottom one, because this is "stop all users making changes."
This one is for everybody but advisors, but if you close it, you
know advisers make mistakes too. So protect yourself by putting a date in
both of those. So now you know how to reconcile your accounts in Xero. And a
lot of people who are just starting out with Xero, sometimes have questions about
security. If that's you, I invite you to download a free copy of our ebook,
Ecommerce Security: Best Practices for Security in a Virtual World. The link is
below. If you liked this video, please hit the like button, and share with your
friends. and be sure to subscribe. Catch you next time!