What is a bank transfer?

A bank transfer is simply the transfer of funds from one account to another account it could be from one bank account to another that you own, or from a bank account to a credit card for example.

How do I reconcile a transfer?

In Xero first of all you need to go into the bank reconciliation screen for your bank account

To do this:

Source Account

1. Click on "Dashboard" in the top menu of Xero. If you have just logged in, you should already be on this page
2. Click on "Reconcile" - this will show you a list of all the transactions that you need to reconcile
3. Find a transaction where you have done a transfer to another account
4. Click on the "Transfer" tab on the right side next to the bank transaction - if you only have one other account in Xero it will suggest this as the account you are transferring to, if you have more than one you will need to select the account that you transferred the money to

You've now completed the first part of the transfer - the next part is to go to the account you transferred to

Destination Account

1. The quickest way to switch to the other account is at the top of the page click your bank account, then select the account you transferred to
2. You now need to find the transfer that was made
3. The transfer should already be highlighted green as a suggested match, simply press OK next to this transaction
4. Thats it you're done!

To be more efficient with this process we recommend reconciling your account in full before moving on to the other account to save switching every time a transfer is made. Because Xero will suggest a match on the destination account, there is no need to switch accounts and reconcile every time a transfer is made and you can instead work on one account before moving to the next.

Transfer Rules

Some bank accounts allow you to write a description when you do a transfer, or they actually list one directly on a bank feed automatically

If you're lucky and you do have this ability then you can use a "Transfer Rule" in Xero to preset your transfers each time they are done

To do this follow the steps below

1. First locate a transfer on your bank account reconciliation page
2. Above the transaction click on "Options" followed by "Create Bank Rule"
3. On the rules page at the top click on "Transfer Money Rule"
4. You can now set the parameters of the rule e.g. if you have something that says Transfer to xx1923 or similar for an account we suggest using this
5. Under create a transfer, if you know the bank account that will receive the transfer change "Bank Account" to be the recipient account - if your bank only says transfer and there is no way of knowing what account the money was sent to, leave this set to "Choose During Bank Reconciliation"
6. Under "Add Rule Details" you can set the rule to one on one account, or all accounts - and - you can can create a name for the rule. We suggest using something simple for example "Transfer to Business Credit Card" as this is the rule name that will show when reconciling
7. Click on "Save"

Provided you have set the rule correctly, you should see the rule suggestion against your bank account.

To reconcile - simply click on OK and it will have everything preset per your rule. Remember, you'll still need to reconcile the actual receipt of the transfer on the desintation account as well but Xero will suggest a match for it.

I Made a Mistake With My Rule!

Don't worry - if you made a mistake when you tried to do the rule you can always go back to it and edit it.

1. Go to the "Dashboard"
2. Click the "Overflow Menu" (three small vertical dots) next to the bank account where you made the rule
3. Click on "Bank Rules"
4. Click on "Edit" next to the name of the rule that you wish to change

Once you are in the edit screen, you can follow steps 4 through 7 in the section above again

Why Cant I Just Reconcile To Tracking Transfers?

In other accounting systems they use what is referred to as a "clearing" account for transfers

The disadvantage of this method is that it is incredibly easy to throw your accounts out of balance because incorrect transfers need to be found and corrected via a balance sheet account, for that reason in Xero organisations that we set up we disable this account.

Xero's transfer method means any transfers that are incorrectly processed will be found on the bank reconciliation report and are much more easily corrected.

TLDR

We have a loom video available here that outlines everything above in under 5 minutes

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