An illustrative composite client situation
This is an illustrative composite client situation. It does not describe one identifiable client or a result achieved by Pillar.
An owner-managed New Zealand service business used Xero bank feeds and reconciled every bank line showing on the dashboard. The owner then opened the month-end profit and loss statement and balance sheet, ready to use them for a hiring and cash-flow discussion. Some costs had been paid on a personal card, a supplier invoice had not reached Xero, and payroll figures came from a separate system.
The owner’s first question was: “If every bank line is reconciled, aren’t the month-end accounts finished?”
The reconciliation status answers a narrower question. It shows how statement lines have been matched or categorised. The accountant still needs to test whether the source records are complete, whether each balance has been reviewed to the same date, and whether anything has been duplicated, omitted or recorded in the wrong period.
What the reconciled status confirms
Xero describes bank reconciliation as matching the business’s accounting records to its bank statement. Its process imports statement data, suggests matches and asks a user to approve a match or categorise a line. A reconciled statement line can be linked to one account transaction, several transactions, or a combination such as a bill and another payment.
That is useful evidence about the bank account. It still needs two checks. The statement balance in Xero should agree with the bank’s statement for the same closing date, and the matching transaction should represent what actually happened. A line can be reconciled to the wrong account, tax treatment, contact or document. A duplicate account transaction may also remain in the ledger after all visible statement lines have been dealt with.
The review has to include every business bank and credit-card account, not only the account that appears first on the dashboard. Loan and finance balances may need their own statements and repayment breakdowns.
Records that do not arrive through the main bank feed
Some business activity never appears as a separate line in that feed. In this composite situation, personally paid costs need evidence and a decision about how they should be recorded. Cash transactions, another card, an overseas payment service or an owner account can create the same gap.
Invoices and bills also carry information that the bank payment alone cannot supply. The accountant may need to know when income was earned, when goods or services were received, whether an invoice was still unpaid at month end, and whether GST information is available. A payment coded straight from the feed does not prove that the underlying invoice, credit note, bill or expense claim is present and correct.
Xero’s own year-end process treats bank reconciliation as one task among several. It also calls for invoices, bills and expense claims to be entered and approved, aged receivables and payables to be reviewed, GST to be checked, and balance-sheet accounts such as loans and fixed assets to be understood.
Payroll, stock and work in progress can sit partly outside Xero, depending on how the business runs. The payroll journal needs to agree with the payroll records and amounts paid. Stock counts or job records may affect the period even though there is no matching bank transaction on the final day of the month. Asset purchases and loan repayments need to be separated into the right accounting components before the reports are read.
Use one cut-off date for the whole review
The bank statement, invoices, bills, payroll, GST records and management reports need a common cut-off. Otherwise a report may include a customer invoice dated in one month and its related cost in the next, or show a supplier payment without the bill that explains it.
Start with the reports the owner plans to use. A cash-flow decision may require a current P&L, balance sheet, aged receivables, aged payables and bank position. A GST review has a different period and evidence set. The accountant can then trace the material balances back to source records and mark any estimates, missing documents or adjustments that are still under review.
Inland Revenue’s business record-keeping guide lists invoices, receipts, credit notes, bank statements, wage records, ledgers, debtor and creditor lists, stocktake figures and fixed-asset records among the records a business may need. It also requires enough information to calculate income, expenses and tax liabilities and allow the accounts to be confirmed if required.
What to bring to a month-end completeness review
A practical first pack includes bank and credit-card statements for the closing date, Xero bank reconciliation reports, the P&L and balance sheet for the same period, aged receivables and payables, open invoice and bill lists, expense claims, payroll reports, GST working papers, loan statements, the fixed-asset register and any stock or work-in-progress records.
Add a short list of accounts or payment methods outside the main feed. Note personally paid expenses, cash, new or closed bank accounts, finance arrangements and software that sends totals into Xero. The accountant should also know which business decision depends on the reports and when that decision is due.
Pillar’s Xero and accounting systems service covers set-up, reporting and process support. If the reports will be used for a forecast or operating decision, the business advisory service may also be relevant. The related profit and cash-flow client situation explains why complete accounts and available cash still answer different questions.
To have a Pillar accountant confirm what should be checked in your records, use the published phone details or enquiry form to contact Pillar. Do not send passwords or sensitive accounting files through the website form.