“How do I deal with reconciling transactions involving credit notes in Xero?” is one question we get asked time and time again.
Firstly, it’s important to understand that there are two slightly different circumstances where a credit note may arise, and these require different treatment in Xero.
What happens if I am refunded the value of the credit note?
On the ‘Reconcile’ page of your bank account, you are unable to directly match a credit note to a refund.
In order to process this correctly, you must first find and open the credit note details. From here, you can add the details, such as date refunded, which bank account it was paid into, and an optional reference.
When you navigate to the bank reconcile page, it should appear as a suggested match for you to reconcile.
Worth noting is that if you are receiving refunds relating to multiple credit notes, these will need to be matched individually.
What happens if I am paying a balance which includes a credit note?
In circumstances where you are paying multiple invoices less a credit note, you must first match the credit note against an invoice before reconciling the entry in the bank.
Open up the relevant credit note and select “allocate credit” in the credit note options drop down.
This will bring up a list of outstanding invoices, you can then enter the value of the credit note against one or multiple invoices as required.
When you then go to reconcile the payment, you will need to search for the contact in the ‘Match’ screen. It will then bring up a list of invoices, showing the amount due after offsetting the credit note which you can then match.
Our cloud accounting experts in Bedfordshire, Cambridgeshire, and Hertfordshire are here to help you explore what works for your business, and to ensure you’re getting the most out of your chosen software.
If you’d like to find out more about how Xero could help you to improve the quality of your data, and so the discussions we are able to have with you about your business, please contact us.
