How to reconcile bank transactions on Xero

beginner 8 min read Updated 2026-03-18

Quick Answer

Bank reconciliation in Xero involves matching imported bank transactions with existing invoices, bills, or creating new transactions. Access the Bank Accounts section, review unreconciled transactions, and either match them to existing records or create new entries to maintain accurate financial records.

Try Xero Full Xero Review

Prerequisites

Active Xero account with bank feeds connected
Bank transactions imported into Xero
Basic understanding of accounting principles
Appropriate user permissions for bank reconciliation

Step-by-Step Instructions

Access Bank Accounts

Navigate to Accounting > Bank accounts from the main menu. Select the bank account you want to reconcile by clicking on the account name. You'll see a list of imported transactions that need to be reconciled.

Look for accounts with numbers in brackets - these indicate unreconciled transactions.

Review Unreconciled Transactions

In the bank account view, scroll down to see unreconciled transactions marked with a Reconcile button. Each transaction will show the date, description, and amount. Review these carefully against your bank statement to ensure accuracy.

Use the date range filter to focus on specific periods and make reconciliation more manageable.

Match Existing Invoices or Bills

For transactions that match existing invoices or bills, click Reconcile next to the transaction. Xero will suggest potential matches. Select the correct invoice or bill from the list and click OK. The transaction status will change to 'Reconciled'.

Xero's auto-matching suggestions appear based on amount, date, and contact details.

Create New Transactions

For transactions without existing matches, click Reconcile and select Create. Choose the appropriate transaction type:

Spend Money - for payments and expenses
Receive Money - for income and receipts
Transfer Money - for transfers between accounts

Fill in the required details and click OK.

Use detailed descriptions and assign correct account codes to maintain clean financial records.

Handle Split Transactions

For transactions covering multiple expense categories, click Reconcile > Create > Spend Money. Add multiple line items by clicking Add a new line. Assign different account codes and amounts for each line item, ensuring the total matches the bank transaction amount.

Common split transactions include business meals with separate food and tip amounts.

Reconcile Bank Transfers

For transfers between your own bank accounts, click Reconcile and select Transfer Money. Choose the destination account from the To dropdown. The transfer will automatically create matching entries in both accounts for reconciliation.

Ensure both accounts are set up in Xero before attempting to reconcile transfers.

Review and Complete Reconciliation

After reconciling all transactions, go to Reports > Bank Reconciliation Summary to verify your work. The closing balance should match your bank statement. If discrepancies exist, review unreconciled transactions and check for errors or missing entries.

Run the reconciliation report monthly to catch and resolve issues quickly.

Common Issues & Troubleshooting

Bank transactions not appearing in Xero

Check your bank feed connection under Accounting > Bank accounts > Manage bank connections. Reconnect the feed if necessary and ensure your bank supports automatic feeds.

Unable to find matching invoice for a transaction

Verify the invoice exists by searching in Business > Invoices. Check if the invoice amount matches the bank transaction exactly, including any fees. Create a new transaction if no matching invoice exists.

Reconciliation balance doesn't match bank statement

Review the Bank Reconciliation Summary report for discrepancies. Check for duplicate entries, missing transactions, or incorrect amounts. Use Find & Match feature to locate unreconciled items.

Duplicate transactions appearing

Delete duplicate entries by clicking the transaction and selecting Delete. This commonly happens when importing statements manually while bank feeds are active. Disable manual imports if using automatic feeds.

Prices mentioned in this guide are pulled from current plan data and may change. Always verify on the official Xero website before purchasing.

Visit Xero View Xero Pricing