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How to Reconcile Deposited Checks/Wires in Xero

This guide explains the process for properly reconciling deposited checks and wire transfers in Xero to ensure accurate financial records.

Overview

Reconciling deposits in Xero is a critical accounting process that matches incoming funds with their corresponding invoices. This ensures accurate accounts receivable tracking and proper revenue recognition.

Procedure

  1. Locate the deposit/wire and click "Match"

Begin by finding the unreconciled deposit or wire transfer in your bank feed that needs to be matched to invoices.

Screenshot showing the Match button for a deposit

Best Practice

Always reconcile deposits as soon as they appear in your bank feed to maintain accurate financial records.

  1. Search for corresponding invoice(s)

Use the search field to find the invoice(s) that correspond to this payment. For optimal matching, enter the specific invoice number.

Screenshot showing the search field for invoices

Search Tip

Searching by invoice number provides the most accurate results and reduces the chance of matching to incorrect invoices.

  1. Click "Go" to execute the search

After entering the invoice number or search term, click the "Go" button to retrieve matching invoices.

Screenshot showing the Go button

  1. Select matching invoices that total the received payment

Choose the invoice(s) that match the deposit amount. In cases where retention was withheld, you'll need to split the invoice to record a partial payment.

Screenshot showing invoice selection interface

Handling Retention

When a client withholds retention, use the "Split" feature to record the partial payment. The remaining balance will stay open on the invoice until the retention is received.

  1. Complete the reconciliation by clicking "Reconcile"

After selecting all appropriate invoices that match the deposit amount, click the "Reconcile" button to finalize the transaction.

Screenshot showing the Reconcile button

  1. Confirm reconciliation completion

The transactions will automatically reconcile after refreshing the screen. You'll see the status change to "Reconciled" once the process is complete.

Reconciliation Checklist

  • Locate the deposit/wire in the bank feed
  • Click "Match" to begin the reconciliation process
  • Search for the corresponding invoice(s) by invoice number
  • Select all invoices that match the deposit amount
  • Use "Split" feature if retention was withheld
  • Click "Reconcile" to complete the process
  • Verify the transaction shows as "Reconciled" after refreshing

Completion

Once all steps are complete and the transactions show as reconciled, the deposit has been properly recorded in your accounting system.