How to Reconcile Your First Transaction

Bank reconciliation is the process of matching the transactions in your bank account with the records you've created in Xero. When done correctly, it ensures your financial reports are accurate and your taxes are calculated correctly.

Step 1: Access the Reconcile Screen

Once your bank feed is connected, navigate to Accounting > Bank Accounts. You'll see a blue button labeled "Reconcile [X] items". Click this to enter the reconciliation workspace.

Step 2: Understanding the Layout

The screen is split into two columns:

• Left side (Bank Statement Line): This is the actual money that left or entered your bank account.
• Right side (Xero Transaction): This is where you tell Xero what that money was for.

Step 3: The "OK" Match (The Green Box)

If you have already created an invoice or a bill in Xero that exactly matches the amount and date of a bank statement line, Xero will highlight the match in green. If the details are correct, simply click OK.

Step 4: Using "Find & Match"

If you've paid multiple invoices with one payment, or if Xero doesn't automatically suggest a match, click the Find & Match link on the right. You can search for the specific invoice(s) and select them to balance the transaction.

Step 5: Creating a New Transaction

If you haven't created an invoice (e.g., for a small expense like coffee or parking), use the Create tab. Fill in the "Who", "What", and "Why" (Account code), then click OK.

Final Checklist

• Ensure the "Statement Balance" and "Balance in Xero" match.
• Don't guess! If you're unsure, use the Discuss tab to leave a note for your accountant.
• Aim to reconcile at least once a week to keep your data fresh.