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Xero Reconciliation 

What is Reconciliation? 

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.

Note
  • This feature is available for Chargebee - Xero integration users
  • The Chargebee-Xero integration is available only in selected plans. To know more, visit Plans and Pricing page.
  • Only Stripe Gateway is supported

Problem: What is the trouble with Xero Reconciliation 

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)?

Bank Transaction Invoices/Transactions
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)
Note

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)

Solution: Create Intermediate Clearing Account 

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]:

  • Create an individual clearing account for every gateway in your Xero Chart of Accounts exclusively for transactions processed by a gateway
  • Download a Gateway statement from Chargebee
  • Upload the statement into the clearing account in Xero

Mapping payments between the Gateway statement, Invoices/transactions and your Bank statement becomes easy.

Note

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
Note

The gateway processing fees may be aggregated in case the fees was applied multiple times.

Setup Xero Reconciliation using Chargebee 

Step 1: Download Gateway Statement

  • Connect your Chargebee and Xero accounts
  • Navigate to the Xero Integration sync settings from Settings > Third Party Integrations > Xero > Reconciliation tab > Download gateway statement
  • Select the date range for which the statement should be downloaded
  • You will be notified when the statement is available for download > once you receive the notification, download the statement

Step 2: Upload Gateway Statement in Xero

  • If you have an existing gateway account in Xero with Type as Bank to manage gateway statement, you can use that, else create a new gateway Account with Type as Bank to import the Gateway statement
Note

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.

  • You can search with Gateway transaction ID to reconcile transactions
  • Repeat this process for Payments and Refunds

Step 3b - Automatic: Run Google Chrome Extension to reconcile automatically

  • Download and Install & run the Google Chrome Extension to automate the Reconciliation process
  • Xero displays 20 records per page
  • You can run the extension for each page in Xero and complete the reconciliation
Note
  • If a match is not found, the extension will skip the entry and proceed to the next transaction
  • The extension will not match Gateway Fees and Settlements to Bank Accounts, these should be matched automatically (as explained in the following steps)

Step 4: Map the Gateway Processing Fees
Map the Gateway Processing fees to a specific expense account in Xero

Note

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

  • Once your bank statement is uploaded, Xero will display the Bank statement and the transactions that have to be reconciled
  • The gateway statement transfers should be reconciled to complete the Reconciliation process

FAQ 

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

  • Offline transactions will be sent from Chargebee
  • Offline transactions will be downloaded into Xero via the Bank Statement feed
  • You should manually match the Offline transactions
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