Reconcile bank account transactions in Xero

Overview

When using the Xero integration feature in ServiceTitan, invoices, payments, applied payments, and bank deposits are exported to Xero as manual journal entries.

The manual journal entry that debits Undeposited Funds, or Checking Account, and credits Accounts Receivable, will not appear directly in Xero’s bank reconciliation screen for matching with a real bank transaction.

This guide describes how to reconcile your bank account transactions in Xero to help you maintain accurate financial records.

Why these don’t appear

• Bank reconciliation workflow in Xero: The bank reconciliation screen is designed to work with transactions like Spend Money, Receive Money, Invoice Payments, or Bill Payments that are specifically recorded as bank account transactions.

• Xero does not allow a bank account to be directly associated with manual journals: As a result, manual journals are not treated as reconcilable transactions because they are not linked to specific bank statement lines.  

Set up GL accounts

When integrating with Xero, set up the following General Ledger (GL) accounts in Xero. The account names, types, and codes must match those in ServiceTitan.

1. Set up the Undeposited Funds account

2. Set up the Checking Account

Step 1: Set up the Undeposited Funds account

Before setting up the Undeposited Funds account in Xero, make sure you have an Undeposited Funds account in ServiceTitan.

This account should already be available in ServiceTitan and labeled as Undeposited Funds by default. Rename this account to Undeposited Funds ST.

To set up the Undeposited Funds account in Xero:

1. Go to Accounting > Chart of Accounts.

2. Click Add Account.

3. Set the following:

   • Account Type: The account type must match with ServiceTitan

   • Account Name: The account name must match with ServiceTitan

   • Code: The code must match with ServiceTitan

4. When finished, click Save.

Step 2: Set up the Checking Account

Before setting up the Checking Account in Xero, make sure you have a Checking Account in ServiceTitan.

This account should already be available in ServiceTitan and labeled as Checking Account by default. Rename this account to Checking Account ST.

To set up the Checking Account in Xero:

1. In Xero, go to Accounting > Chart of Accounts.

2. Click Add Account.

3. Set the following:

   1. Account Type: The account type must match with ServiceTitan

   2. Account Name: The account name must match with ServiceTitan

   3. Code: The code must match with ServiceTitan

   4. Enable payments to this account: Select this option

4. When finished, click Save.

Accounting impact of journal entries

When a payment is created in ServiceTitan and synced to Xero, a journal entry is created for the payment  journal entry type of Payments (Invoices), reflecting the following impact:

• Debit to the Undeposited Funds account

• Credit to the Accounts Receivable account.

When a bank deposit is created in ServiceTitan and synced to Xero, a journal entry is created for the deposit with a journal entry type of Bank Deposit, reflecting the following impact

• Debit to the Checking Account

• Credit to the Undeposited Funds account

All bank deposits go to the Checking Account and appear in the Balance Sheet in Xero.

Reconcile bank account transactions

Follow the steps below to reconcile your bank account transactions in Xero:

1. Confirm that the bank account received the bank account transaction

2. Reconcile the bank transactions

3. Verify the clearing account is balanced

Step 1: Confirm bank account received bank account transactions

To confirm the bank account transaction in Xero, go to Accounting > Bank Accounts and view the Statement Balance for bank account transactions and Balance in Xero for matched, received, or paid transactions.

Step 2: Reconcile the bank transactions

When you receive the real payment in your bank account, create a Receive Money transaction, if needed.

1. In Xero, go to the bank account transaction in the Bank Reconciliation screen.

2. Click Create > Add Details.

3. Record the transaction as Receive Money:

   1. From: Leave this blank or enter a general description, such as the customer’s name

   2. Reference: Leave this blank or enter a general description such as ST Deposit JE

   3. Account: Select the clearing account, which is the Checking Account

   4. Amount: Match the payment amount from the bank statement.

4. Save and reconcile.
   
   

Step 3: Verify the clearing account is balanced

The clearing account should always balance to $0 after all payments have been reconciled to the bank account. You have two options to verify:

• Option 1: Check from the Chart of Accounts

• Option 2: Check from the Balance Sheet

Check from the Chart of Accounts

1. In Xero, go to Accounts > Chart of Accounts.

2. Find the clearing account, which should be labeled as Checking Account in the list.

3. Check the account balance.
    

4. The remaining value represents deposits (payments) that have not been matched because the corresponding bank transactions have not yet been received.
    

Check from the Balance Sheet

1. In Xero, go to Accounting > Reports > Balance Sheet.

2. Find the clearing account, which should be labeled as Checking Account.

3. Look at the current value.
    

4. The remaining value represents deposits (payments) that have not been matched because the corresponding bank transactions have not yet been received.

Want to learn more?

• See Accounting integrations

• See Xero integration guide