Square provides an easy to use POS platform that allows businesses to quickly implement a modern POS solution into their processes that can connect to their online store, manage their inventory and lots more. However, with every POS comes a need for accounting, and Square does provide integration to Xero through Amaka to streamline the account reconciliation process. However, this bank feed doesn’t work in quite the same way as most others and we find it can leave clients confused as to how to actually reconcile their Square balances in Xero.
Why? The Square bank feed doesn’t create transfer transactions for the settlement into the bank account. They don’t exist. When clients manually add them from their bank feed, it results in transactions that cannot be reconciled on the Square side since they are simply not there in the Square bank feed.
Other merchant service gateways, like Stripe, behave just like a normal bank feed, but the Square integration via Amaka does not.
We find this confusion repeatedly occurs with our clients who use both Square and Xero, and documentation on both the Square and Xero sides is conspicuously absent on this issue. So, with that in mind, in this standard operating procedure (SOP), we’re going to cover how to complete the reconciliation of a Square sale in Xero.
In this SOP, we assume that you already have your Square bank feed connected in Xero using the Amaka integration, that it is all configured, and that it is creating transactions in the bank feed, along with matching invoices, fee payments and so on, in line with the process that you have configured. If you need assistance with connecting Square to Xero, you can reach out to Amaka support, or you can get in touch with us and we can assist with configuring the integration for you.
SOP Summary
- Goal: Reconcile the Square balance in Xero
- Ideal Outcome: Square balance is reconciled in Xero
- Why Is It Important: If it is not reconciled, it will show incorrect balance data and can throw out your accounting figures.
- Where Is This Done: In your Xero dashboard
- When Is This Done: During bank account reconciliations.
- Who Does This: Bookkeeper or admin staff
Prerequisites for Installation
Square must be connected to Xero via the Amaka integration (which is free for Square users).
Required:
- Square account
- Xero account
- Square settlement bank account with bank feed connected to Xero
- Completed Amaka integration between Square and Xero accounts
- Basic understanding of Xero
- Xero “Enable Mark as Reconciled” option must be turned on
Prerequisite: Enable Mark As Reconciled in Xero
If you do not already have “Enable Mark as Reconciled” turned on in your Xero account, you will need to do so to complete this process. You can do this by clicking the “?” icon at the top right and then clicking the “Enable Mark as Reconciled” toggle, as below.
This option is usually disabled for each user by default. Once toggled on, it will remain on for your user account until you turn it off—if you reconcile Square in Xero frequently, we recommend leaving it on.
Process Part 1: Reconcile the bank feed in Xero
This is the easy part, and you are likely already familiar with and already doing this part.
Step 1: Go to the settlement bank feed
Navigate to your Xero dashboard, find the bank account where your Square funds settle, and click the “Reconcile” button. The screen will also indicate the number of items that need to be reconciled. For example, in the screenshot below, there are 2 items to be reconciled.
Step 2: Reconcile the settlement side
Reconcile any deposits into your settlement bank account from Square as a “Transfer” from the “Square Balance” account. Note, you may have named yours differently.
Step 3: Reconcile the same transactions on the Square side
Go to the Square Balance transactions list and check the box beside all the balance transfers that are from the settlement bank account and are showing as unreconciled in the Square Balance. You will not be able to reconcile these the same way as the bank account side because the matching transactions don’t exist on the bank feed that is generated by Amaka. Thus they will always show as unreconciled.
From the options at the top of the transaction list, click the “More” drop down and select “Mark as reconciled”.
It may warn you that marking as reconciled is only used when the original bank transaction data cannot be imported from the bank. If so, click “Mark as Reconciled” anyway to complete the action. You can also check the box “Don’t show this warning anymore”
All Done!
That’s it. There is a gap in the bank feed regarding those settlement transactions, which creates a lot of confusion for our clients when they reconcile their Square transactions in Xero using the Amaka integration.
Once you know what the gap is and how to work around it, it’s a simple process.
If you or your team need help with Square, Xero, or Amaka, please don’t hesitate to reach out to us and have a chat!
