Reconciliation is the process of confirming that the balance in the Accounting books matches the balance in the Statement [gateway statement, bank statement etc].
Reconciliation helps your accounting team confirm that all the amounts appearing in the statement are brought to record into the books of accounts and a clear explanation emerges for the unreconciled items.
Imagine that you have a number of invoices processed on a daily basis. The payments are initiated from Chargebee and processed by your gateway. The gateway transfers the final amount (as a lump sum) at the end of the day or after a few days depending on the gateway, with no correlation to the original Invoices for which payments are processed. The problem statement is as follows:
How do we reconcile the invoices/transactions with the bank statement when one lump sum amount is deposited in the Bank Account (when you do not know which individual invoices make up the lump sum amount)?
|Sum of $490 credited to the Bank Account on 4th Jan||Customer 1 - Invoice 001 - $99 (Paid on 2nd Jan)|
|Customer 2 - Invoice 002 - $99 (Paid on 2nd Jan)|
|Customer 3 - Invoice 003 - $99 (Paid on 2nd Jan)|
|Customer 4 - Invoice 004 - $99 (Paid on 2nd Jan)|
|Customer 5 - Invoice 005 - $99 (Paid on 2nd Jan)|
Stripe can be linked to Xero as a payment processor. But Stripe cannot be connected to Xero to download the statement from Stripe (as you can do with your bank accounts)
The Reconciliation process can be simplified by following the steps mentioned below [this is a recommendation from Chargebee and may vary based on different accounting practices]:
Mapping payments between the Gateway statement, Invoices/transactions and your Bank statement becomes easy.
Currently, Chargebee only supports downloading and pushing account statements from Stripe Gateway.
|Invoices/ Transactions||Gateway Statement||Bank Transaction|
|Customer 1 - Invoice 001 - $99 (Paid on 2nd Jan)||Transaction processed, for $99|
|Customer 2 - Invoice 002 - $99 (Paid on 2nd Jan)||Transaction processed, for $99|
|Customer 3 - Invoice 003 - $99 (Paid on 2nd Jan)||Transaction processed, for $99|
|Customer 4 - Invoice 004 - $99 (Paid on 2nd Jan)||Transaction processed, for $99|
|Customer 5 - Invoice 005 - $99 (Paid on 2nd Jan)||Transaction processed, for $99|
|Processing Fee - $5.00|
|Transfer $490 to Bank account on 4th Jan|
|Sum of $490 credited to the Bank Account on 4th Jan|
The gateway processing fees may be aggregated in case the fees was applied multiple times.
Step 1: Download Gateway Statement
Step 2: Upload Gateway Statement in Xero
All Paid Invoices shall be integrated from Chargebee to Xero into the Gateway account in Xero with Type as Bank.
Step 3a - Manual: Reconcile the Invoices/ Transactions with Gateway Statement
Chargebee ensures the payment transactions sent to Xero contain the gateway transaction ID.
The gateway transaction ID will be available in the gateway statement as well.
Note: Xero uses Customer Name, Date, Amount for finding matching entries for reconciliation. But when the transactions are processed via the gateway, it will not be possible to use these search criteria to search for the transactions. Hence the gateway transaction ID should be used for searching.
Step 3b - Automatic: Run Google Chrome Extension to reconcile automatically
Step 4: Map the Gateway Processing Fees
Map the Gateway Processing fees to a specific expense account in Xero
You can also create a Reconciliation rule so Xero can match the conditions next time and automatically display as a match. Read more about Xero Reconciliation rules.
Step 5: Transfer settlement amount to a Bank Account
After the Payments and refunds are reconciled between the Gateway Statement and Gateway Bank account, the lump sum amount pending to be transferred in the Gateway Statement shall be transferred from the Gateway Bank Account to your actual Bank Account.
Step 6: Reconcile Bank statement entries
1. How will the gateway statement be converted into QuickBooks understandable format?
When you download the statement from Chargebee, Chargebee will understand the type of gateway and convert it to a format accepted by Xero.
2. How are multi-currency invoices managed?
For Multi currency users, the exchange rate will be derived from the Gateway (by calculating the exchange rate from the original and converted amount)
3. How will offline payments be reconciled