How to Keep Your Xero Bank Reconciliations Accurate Every Week

Weekly bank reconciliations in Xero don’t need to be a chore. With a simple routine, you’ll keep your books accurate, cash flow clear, and VAT filings stress‑free. Here’s a practical checklist we use with clients across the UK.

Prep: set the foundation once

• Connect and verify bank feeds

  • Use direct bank feeds where possible; avoid manual CSVs. If you must use CSV, validate dates, amounts, and headers before import.

• Lock dates

  • In Xero, set Lock Dates after each VAT return and year‑end to prevent accidental back‑posting.

• Create spend/receive money templates

  • For regular items (bank charges, owner drawings), set templates to speed up consistent coding.

• Agree your chart of accounts

  • Keep it lean. Merge duplicates and archive unused codes to reduce miscoding.

Weekly checklist (15–30 minutes)

• Step 1: Refresh bank feeds

  • Click “Get bank transactions” and ensure the statement balance matches your bank. Investigate any feed gaps immediately.

• Step 2: Clear outstanding matches

  • Use the “Match” tab to link payments to approved sales invoices and bills. Avoid creating new transactions when an invoice/bill exists.

• Step 3: Use bank rules (but review them)

  • Set rules for small, recurring items (subscriptions, software, parking). Review suggestions—don’t blindly accept.

• Step 4: Code transfers correctly

  • Use “Transfer” between accounts (e.g., current → savings, Stripe → bank) so Xero creates both sides. Don’t code transfers to expense accounts.

• Step 5: Attach documents

  • Attach receipts/invoices to transactions via Xero, Hubdoc, or Dext. This supports VAT and keeps audit trails clean.

• Step 6: VAT awareness

  • For VAT‑registered businesses, confirm the correct VAT rate (20%, 5%, 0%, Exempt, No VAT). Watch for common pitfalls: software bought from abroad, mixed‑rated bills, fuel receipts.

• Step 7: Reconcile to zero

  • Aim to clear the “Reconcile” tab each week. Flag anything you’re unsure about and keep a short “queries” list.

Monthly tidy‑up (30–60 minutes)

• Supplier and customer statements

  • Spot‑check a few statements to ensure balances align with Xero.

• Suspense and mis-postings

  • Review “Ask my accountant” or suspense codes—recode with proper documentation.

• Duplicate detection

  • Run “Find & Recode” (if you have permissions) to fix repeated rules or duplicated CSV imports.

• Bank statement exceptions

  • Download bank statements and compare start/end balances to Xero for the month. Investigate any missing days or duplicates.

Common Xero reconciliation mistakes (and fixes)

• Creating “Spend Money” instead of matching a bill

  • Fix: Find & Recode or remove the spend money and pay the bill properly.

• Treating payment processor payouts as sales

  • Fix: Set up clearing accounts for Stripe/PayPal/Amazon; post fees and transfers correctly, then transfer to the bank.

• Misusing “Overpayments”

  • Fix: Only use when a customer truly paid more than invoiced; otherwise, allocate to the correct invoice.

• Incorrect VAT codes on non‑UK or software purchases

  • Fix: Apply Reverse Charge where required; consult your accountant for specifics.

Simple workflow you can copy

• Monday

  • Refresh bank feeds; reconcile weekend transactions; file queries.

• Wednesday

  • Process purchase invoices/receipts; apply or adjust bank rules; attach documents.

• Friday

  • Clear remaining reconciliations; sanity‑check balances; update your queries list for your bookkeeper.

Reporting to validate accuracy

• Bank Reconciliation Summary

  • Check for “Statement balance vs. Xero balance” differences. Differences should be zero after reconciliation.

• Aged Payables and Receivables

  • Look for odd negatives or very old balances—often reconciliation or allocation issues.

• VAT Reconciliation (if registered)

  • Confirm VAT control matches your VAT return totals for the period.

Mini FAQ (add FAQ schema)

• How often should I reconcile in Xero? Weekly is ideal. Daily if transaction volumes are high.

• Do I need bank rules? Yes—for speed and consistency, but always review suggestions.

• What if my bank feed is missing days? Import a CSV for the missing dates and avoid overlapping date ranges to prevent duplicates.

• Can you fix a messy backlog? Yes—do a structured catch‑up, then move to a weekly routine.

Need help getting a clean weekly rhythm? Banana Bookkeeping’s Xero‑certified team can set up rules, tidy historic transactions, and run your weekly recs—so your VAT and reporting stay accurate.