When the cash statement doesn't match the bank

A Tier 4 cash statement has to add up: the opening balance, plus everything received, minus everything paid, should equal what you actually had at the end of the year in your bank accounts, term deposits and cash on hand. If it doesn't, something is missing or counted twice.

The usual causes

• Unreconciled transactions: entries in Xero that haven't been matched to the bank statement. They may be duplicates, or payments that never went through the bank.
• Opening balances entered when you started using Xero (conversion balances). These set the starting bank balance but aren't real receipts.
• Old-style expense claims or receipts that were paid from the bank but recorded in a way that doesn't show up as an ordinary bank transaction.
• Transfers where only one side was recorded, or the two sides fall in different years.
• Payments made from a personal account and coded in Xero as if the charity paid them. If the money didn't go through the charity's bank, it isn't cash paid by the charity.
• A bank account missing from Xero, such as a term deposit or a second account. Every account the charity holds needs to be included.

Finding the difference

1. Reconcile every bank account in Xero up to the last day of the financial year.
2. Compare month by month. When the difference first appears in a particular month, look at that month's bank transactions in Xero.
3. Check accounts with names like “Suspense” or “Ask my accountant”, and recode anything sitting there.
4. Fix the cause in Xero where you can, then refresh your figures.

Our app does the month-by-month comparison for you against the Xero Bank Summary, links straight to the transactions in Xero, and lets you record common cases such as a conversion balance in a couple of clicks.

Last year's figures

This year's opening balance must equal last year's closing balance, and the “last year” column should match the report you filed last year. If you find a mistake in last year's report (for example, a wrong closing bank balance), you don't need to refile it. Explain the error and how you've corrected it in the “correction of errors” note this year.