In this guide · 8 sections
- 01What bank reconciliation actually means
- 02How bank feeds and suggested matches work
- 03Bank rules: let the software code repeat transactions
- 04Why Stripe, Shopify and PayPal payouts confuse reconciliation
- 05When the balances won't agree: common causes
- 06How often to reconcile, and when to ask your bookkeeper
- 07Do it yourself or get help?
- 08Frequently asked questions
Short answer
Reconciling means matching each bank statement line to a transaction in your books so the software balance equals the real bank balance. Bank feeds bring the lines in, bank rules code repeat items, and payouts from Stripe or Shopify must be split into sales, fees and refunds to match.
What bank reconciliation actually means
Your accounting software keeps its own record of money in and out: invoices paid, bills paid, expenses claimed. Your bank keeps the real record. Reconciling is the act of pairing the two so that every bank line is explained by something in your books, and nothing in your books is missing from the bank.
When it is done regularly, your cash balance, profit figures, GST return and the reports your accountant prepares can all be trusted. When it is not, small errors pile up: a customer payment recorded twice, a bank charge never entered, an invoice still shown as unpaid long after the money arrived.
| Bank statement line | Match in your books | Result |
|---|---|---|
| Deposit S$1,070 from a customer | Invoice INV-104 for S$1,070 | Invoice marked paid |
| Withdrawal S$2,500 'Rent Oct' | New spend money transaction to Rent | Expense recorded |
| Withdrawal S$5 bank service charge | New spend money transaction to Bank Fees | Fee recorded |
| Deposit S$3,412.60 from Stripe | Several sales minus fees and refunds | Needs splitting (see below) |
How bank feeds and suggested matches work
A bank feed sends your statement lines into the accounting software automatically, usually once a day. Xero's help on reconciling your bank account explains that Xero suggests a match for each line based on your bank rules, similar past transactions and open invoices or bills. You check the suggestion and click OK, or find the right transaction yourself.
QuickBooks Online and Zoho Books work the same way: transactions are downloaded, the software proposes a category or match, and you confirm. Feeds remove typing, not judgement. Someone still needs to check that a S$1,070 deposit really is the invoice the software thinks it is.
In Singapore, DBS, OCBC and UOB offer direct feeds to Xero with different timings and set-up steps; our guide to Xero bank feeds for DBS, OCBC and UOB has the details.
Bank rules: let the software code repeat transactions
Most businesses pay the same things every month: rent, software subscriptions, bank charges, CPF, phone bills. A bank rule tells the software 'when a line looks like this, code it like that'.
Pick a transaction that repeats
Start with the most frequent ones, such as card fees, subscriptions or a monthly rent payment.
Set the conditions
For example, description contains 'GOOGLE WORKSPACE' and the amount is money out.
Set the coding
Contact, account (for example Software Subscriptions) and GST treatment.
Decide whether to auto-confirm
Xero suggests the transaction for you to confirm. QuickBooks Online lets you turn on auto-add for rules you trust, which posts them without review.
Order and review your rules
Xero checks rules in the order they appear, so put specific rules above general ones. Review rules a few times a year as suppliers change.
Xero's bank rule help covers spend money, receive money and transfer rules. QuickBooks' bank rules guide notes that the software also learns from how you categorise over time.
Why Stripe, Shopify and PayPal payouts confuse reconciliation
Payment platforms collect many customer payments, take their fees, subtract refunds and send you one lump sum. Your bank shows a single deposit; your books show dozens of individual sales at full price. They will never match line for line unless the payout is broken down.
Record the payout as one sale
Common mistake- Fees never recorded as expenses
- Sales understated by the fees
- GST and margins wrong
- Impossible to trace a single order
Best for: Nobody. It hides costs.
Treat the platform as a clearing account
Recommended- Each sale recorded at full value
- Fees and refunds recorded separately
- Payout is a transfer from the clearing account to the bank
- Clearing account should return to zero
Best for: Any business taking card or online payments.
Stripe's payout reconciliation report groups each payout with the payments, refunds and fees it contains, which is the information your books need. Integrations such as A2X, Link My Books or native connectors can post this breakdown automatically. Our guides on PayPal fees in Xero and connecting Shopify, Stripe and Xero show the clearing-account approach step by step.
When the balances won't agree: common causes
Xero's help on comparing the statement balance says that if the balances differ for the same date, either the opening balance is wrong or there is an error in the imported statement lines. In practice the usual suspects are these.
Check these before calling for help
QuickBooks lets you post an adjusting entry for a small leftover discrepancy, but its help suggests doing so only after reviewing everything. A forced adjustment hides the problem rather than fixing it.
How often to reconcile, and when to ask your bookkeeper
With feeds and rules in place, a few minutes two or three times a week keeps most small businesses up to date. Leaving it for a quarter turns it into a day of detective work, usually just before the GST return is due.
You can handle it
- Matching customer payments to invoices
- Coding repeat expenses with bank rules
- Spotting a duplicate you just created
- Recording bank charges and interest
Ask your bookkeeper or accountant
- Old months already reported or filed for GST
- Unreconciled history running over a year
- Payments that don't match any invoice or bill
- Loans, hire purchase, director's account and foreign currency gains or losses
Do it yourself or get help?
If your software is set up cleanly, daily reconciliation is a job you or an admin can own, with your bookkeeper reviewing month-end. Most of the pain comes from setup: wrong opening balances, missing feeds, no rules and payment platforms posted as lump sums.
Our Accounting Software Setup (S$490) sets up Xero, QuickBooks Online or Zoho Books in your name with bank feeds and your accountant invited. Sales & Payout Sync (S$490) connects up to 3 sales channels so fees, refunds and payouts are split out and match your bank. IT Sorted is a Singapore-based team of developers with over 10 years of experience; you pay upfront, send the brief in writing and follow progress on your order page. We set up the software; your bookkeeper or accountant remains responsible for the accounts.
Frequently asked questions
It is checking that every line on your bank statement matches a record in your accounting software, and that the balance in the software equals the balance in your bank for the same date. It catches missing expenses, duplicated payments and invoices that were paid but still show as outstanding.
Not by itself. A bank feed imports statement lines into Xero, QuickBooks or Zoho Books, and the software suggests matches. A person still confirms each match or coding. QuickBooks can auto-add transactions that meet a rule, but those rules should only cover predictable items such as fixed subscriptions.
Stripe pays out the total of many payments minus its fees and any refunds, often days later. Record each sale at full value in a Stripe clearing account, record fees and refunds there too, and treat the payout as a transfer to your bank. Stripe's payout reconciliation report lists what each payout contains.
Little and often works best. With feeds and bank rules in place, a few minutes two or three times a week keeps the books current. At minimum reconcile monthly, and always before a GST return or before sending figures to your accountant, so that errors are found while they are still easy to trace.
Bank rules tell Xero how to code a bank statement line that meets conditions you set, such as a description containing a supplier's name. Xero then suggests a spend money, receive money or transfer transaction with the contact and account filled in, and you confirm it. Xero applies rules in the order listed.