Reconcile payments received from online sales or my payments processor
If you sell online and your store downloads sales directly into Xero, or you receive invoice payments from customers via a payments processor like a credit card merchant, you'll need to reconcile the bulk payments received in your bank account to your individual sales invoices. One way to do this is to create a clearing account in your chart of accounts which you can then use to match both sides of the transaction.
Set up a clearing account in your chart of accounts
Set up a separate current asset account for each type of bulk payment you receive, for example, Eftpos, Mastercard, Visa, American Express. This account will act as a clearing account. That is, you'll credit the bulk receipt from your online store or payment processor to this account, and debit the individual invoice payments from this account. These debits and credits will cancel each other out.
Set your online store or payments processor to credit the clearing account for invoice payments
In your online store or payments processor edit the settings so that, when it marks your Xero invoices as paid, the payment shows in the clearing account you created in Xero.
For example, if you've created a current asset account called 'Mastercard Clearing Account', edit the settings in your online store or payments processor so that it credits invoice payments to this account.
When the bulk receipt from your online store or payments processor appears on your bank reconciliation in Xero, code it to your clearing account. You might want to set up a bank rule to do this for you.
From time to time, check the transactions in your clearing account using the Account Transactions report. The total of payments applied to your customer invoices on a particular day will match off against the bulk receipt you coded in your bank reconciliation. Any remaining balance in the account will be either:
Customer invoices where you haven't received the payment in your bank account yet
A payment received in your bank account where the individual customer invoice payments haven't been downloaded by your online store or payments processor yet
If your clearing account has many transactions, it may be easier for you to export the Account Transactions report and reconcile it in a spreadsheet program such as Microsoft Excel.
If you refund a customer for part or all of a sale:
- In Xero, create a sales credit note for the amount of the refund. Reference the original invoice number on the credit note.
- Apply a payment to the credit note by following the process to make a cash refund. Use the clearing account as the payment account.
Your next receipt from your online store or payment processor will include the customer credit. The total amount received will match invoices less the credit note in your clearing account.
Some payment processors deduct their fees from their payments to your bank account. You should receive a regular statement from the payments processor showing the fees deducted.
Create a manual journal to debit the fees to a fee expense account. This will offset the fees in your clearing account.