What is a Xero Clearing Account?
When your customers pay invoices through Fergus Pay, the money doesn't land in your bank account instantly. Our payment gateway provider, Stripe, holds each payment until the funds are deposited into your bank account in a single deposit called a payout - usually grouping several customer payments together, minus any processing fees (if you're not passing fees on to the customer).
This timing gap can make reconciliation in Xero tricky: a single bank deposit rarely matches a single invoice, so you need to work out which invoices are included in each payout. A clearing account makes this easier.
The Fergus Pay Clearing Account in Xero is a holding account that sits between your customer payments and your bank account:
When a customer pays you via Fergus Pay, Fergus posts a payment transaction into the clearing account.
When Stripe pays out to your bank, Fergus posts that amount to the clearing account to match off against the funds received.
The result is a clean, automatic trail in Xero - invoices are marked paid on time, processing fees are recorded correctly, and Stripe payouts reconcile neatly against the transfer from your clearing account.
What this feature does automatically
Once the clearing account is set up, Fergus sends the following to Xero automatically:
Customer payments - when a customer pays via Fergus Pay, the payment is synced to Xero against that invoice and into your clearing account. Xero will show the payment against the invoice, keeping your overdue reporting up to date. (Dr Clearing Account, Cr Accounts Receivable)
Processing fees - payment processing fees paid by your business are synced to Xero when your customer pays, recorded as a bill against your configured transaction fees account, and paid from the clearing account (Dr Processing Fee Costs, Cr Clearing Account)
Stripe payouts - when Stripe deposits a payout into your bank, Fergus syncs a transaction from the clearing account to your bank account, which you can reconcile against the bank deposit. (Dr Bank Account, Cr Clearing Account)
Before you start
Before setting up the clearing account in Fergus, you'll need the following accounts in place under your Chart of Accounts in Xero:
A transaction fees account - an expense account for coding payment processing fees. For example:
A clearing account - this account must have "Enable payments to this account" ticked in Xero before it will appear as an option in Fergus.
Setting up the clearing account in Fergus
Go to your Xero account settings in Fergus
Scroll to the Clearing Account Settings section
Complete the fields as described in the field guide below.
The "Use a clearing account in Xero for Fergus Pay" toggle switches on automatically once all required fields are filled in. To turn the feature off, switch the toggle off - this will clear the saved accounts.
If you can't see the Xero account or bank account you want in a dropdown, hit the Refresh Data button at the top of the Xero settings page and try again.
Field Guide
Field | What to select |
Transaction Fees (required) | The Xero expense account where payment processing fees paid by your business are recorded. |
Clearing Account (required) | The Xero account used as your clearing account. Must have "Enable payments to this account" enabled in Xero to appear here. |
Stripe Payout Bank Account (required) | The Xero bank account your Stripe payouts are deposited into. |
All three required fields must be completed before the clearing account feature becomes enabled.
š”IMPORTANT: Your first payout after setup
Any invoice payments collected before you turned on the clearing account won't have moved through it. On your first Stripe payout after setup, the bank deposit may include both clearing-account payments and these earlier ones.
When reconciling that first deposit in Xero, match it to the clearing account transfer plus any individual invoice payments that didn't move through the clearing account. After this first payout, all payments will flow through the clearing account and reconciliation will be straightforward.
After your first payout, we recommend checking that the flow of funds into the clearing account and the transfer to your bank account look as expected.
ā ļø Disclaimer
Fergus cannot provide accounting advice specific to your business. This article describes the Fergus features that can help make reconciliation of Fergus Pay transactions easier in Xero. Please consult with your accountant and/or bookkeeper before activating this feature.
Fergus highly recommends keeping all your bank accounts and your clearing account fully reconciled daily in your accounting system.
If you have any questions, please get in touch via support@fergus.com.