Brisbane Bookkeeping Notch Above Bookkeeping

Help! I can’t get my Xero accounts to balance out.

Xero is a powerful cloud accounting tool that has empowered many small business owners to take charge of their own finances. It’s a blessing for both business owners starting out and established businesses who rely on drawers of files and reams of paper.

Technically, you could manage your books on your own without any help. However, I don’t recommend a DIY approach.

Honestly, there have been countless times when someone desperately comes to me to surrender their Xero files due to an error they have no clue about. From my experience, this usually occurs when the client has no basic grasp of how Xero works. Most of the time, it is an easy problem to rectify.

One of the most comment questions I’m asked is “Why aren’t my accounts reconciling in Xero? I’m pretty sure I did everything right?”

And I’m going to answer that for you in an easy to follow list of all the common reasons why your accounts are not tallying.

How Xero works

I’ll briefly explain the basics of Xero accounting. On one hand, you can create business transactions in Xero. These are for items such as:

  • Spend Money: electronic payment, withdrawal, bank charges, direct debit, etc.
  • Receive Money: interest, cheque deposits, etc.
  • Transfers between accounts
  • Payroll payments

On the other hand, Xero will automatically pull in all your banks’ transactions.

The idea is to match the transactions you have created to the actual bank transactions that happen. To do this, there are many handy features in Xero that mirror real-life accounting. You can match multiple transactions to one bank transaction, reconcile part payment, undo a reconciled bank transaction if you made a mistake or delete and start over.

In order for your accounts to balance out, you need to have every single transaction matched or reconciled. Sounds straightforward, right?

However, you may find that your accounts are not balanced at times, meaning there are unreconciled transactions. You need to tackle each transaction one by one, tracing the origin and why it ended up unreconciled. Below are simple reasons why this problem may arise.

# 1. Using cheques

If you pay using cheques, you have no control over when the receiving party cashes it in. Until that is done, you may have an outstanding transaction in Xero that has no bank transaction to match.

# 2. Delay in deposits

This can occur when you record a transaction for a deposit, but the money has not arrived in your bank account. Most banks will process deposits within the same business day, but there can be delays due to cut-off processing times. This situation may also arise if using a cheque instead of an electronic payment.

# 3. Delay in online payments using credit cards

This happens when you create transactions against an invoice in Xero and payment is done online using a credit card. Everything depends on the merchant service as they have different processing times. It can take up to a week for certain merchants so make sure you understand their terms of service.

# 4. Payment not cleared

If you issue a payment, sometimes the transaction may not occur on the same day. Delays of 1-2 days is perfectly normal.

These four cases are the simplest explanation as to why you have outstanding transactions in Xero. Once you’ve figured out the root cause, you should allow a few days before seeing the bank transactions. Anything longer should be investigated.
For other cases, you could be looking at a big bookkeeping error that’s messing up your accounts, or a one-off mistake that’s easily fixed.

When you’re stuck or confused, get in touch with us, we have a good grasp of small business finance and will save a lot of time and avoid a massive headache that could keep you away from doing what you do best – running and growing your business.

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Specialising in Xero bookkeeping, Notch Above is a Brisbane bookkeeper and BAS Agent located in Alderley that offers Xero setup, as well as training and ongoing support. Notch Above can take care of all the bookkeeping tasks you would rather not do, like bank reconciliations, supplier payments, payroll services, debtor control and BAS returns.

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Author Info

Jac Gallager

Jac Gallagher is the owner of Notch Above Bookkeeping, a Xero Gold Partner and experienced BAS Agent. Jac aims to put energy and passion back into the lives of small business owners by taking away the daily stress of bookkeeping and give them greater understanding of their business financials.

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