How reconciliation works

1. Reconciliation between GoCardless and Xero

2. Reconciliation with International Payments

1. Reconciliation between GoCardless and Xero

For reconciliation to work between GoCardless and Xero, you need to have two bank accounts in Xero.

GoCardless charges a fee on all transactions, which is taken from the payouts you receive from your customers. This means that the net amount received against any individual invoice is not equal to the total amount due on each invoice, and the fees that GoCardless have taken need to be recorded on your accounts. Using a clearing account enables both to be reconciled.

We post a payment for the full invoice amount into the clearing account. Then on the day you receive payouts from GoCardless (which could include multiple payouts from customers) we will:

1. Post GoCardless fees against your nominated fee account

2. Transfer the payout (net of fees) into your current account

This ensures that your clearing account has all the correct transactions and reconciling your current account is as simple as marking one transaction against each transfer, instead of having to mark multiple individual invoices and fees.

On your Current Account reconciliation page, once your bank feeds have imported, your receipt from GoCardless should auto match for reconciliation against the transfer we created from the Direct Debit account.

The only part of the reconciliation process that we cannot yet automate, is the final reconciliation of the transfer out of the Direct Debit account. When viewing the Direct Debit Account Transactions page, you will see the transfer as unreconciled.

In order to reconcile this, you must click into the transaction, and then click Options (top right of the transaction details) and then choose 'Mark as Reconciled'.

For more information on this please view our video here.

2. Reconciliation with International Payments

International payment collection means the payment will be collected in your customer's currency, and then converted to be paid out in your home currency. We need to reflect this currency conversion in Xero and this is handled within the Direct Debit interim account that is created for you within Xero.

We'll use an example to show how collecting a foreign currency invoice will be reconciled:

1. For this example, we'll assume that the business is based in the UK. We'll use an invoice that is in USD, being charged from a customer in the USA. The invoice is for $120 and the due date on the invoice is 2020-08-12.

2. On the due date of the invoice, the payment is collected from the customer's bank account by GoCardless. The invoice is marked as paid in Xero on this day, and this payment is paid into the USD Direct Debit interim account. 

3. On the payout date, the funds are transferred by GoCardless to your bank account. Within Xero on this date, two transactions will show in the Direct Debit - USD account:

   • A ‘SPEND’ transfer of the payout amount (net of fees) from your Direct Debit - USD account to GoCardless Cross-Currency Transfers (in our example, that would be the net payout of $116.82)

   • A ‘SPEND’ transfer of the payout fees from the Direct Debit - USD account into your nominated fee account (in our example, that’s the fees which is $3.18)

4. On your Current Account reconciliation page, once your bank feeds have imported, your receipt from GoCardless should auto match for reconciliation against the transaction we created from GoCardless Cross Currency Transfer. In our example, this is £89.39 (equivalent to the $116.82 above, using the GoCardless exchange rate).

5. To view any realised gains or losses which are present due to the differences between the Xero exchange rates and GoCardless exchange rates, you can go to Accounting > Reports > Account Transactions. Search ‘GoCardless’ in the accounts list to find your Cross-Currency Transfers Account (If you aren’t sure which account this is, go to the Xero Reconciliation settings page in the GoCardless for Xero dashboard). You should then see money coming in in various currencies (in this case, USD) and going out in your GoCardless home currency (in this case GBP). The money left in this account will represent the realised FX gain / loss which you have incurred due to the difference between the Xero exchange rate and the GoCardless exchange rate.