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Clearing Account - Using a clearing account with WorldPay (Payrix), GoCardless and eWay

This article is for Cloud Depot users who need to reconcile bundled settlements from Worldpay (formerly Payrix), GoCardless or eWay in Xero. It explains how to use a Clearing Account to accurately bridge the gap between gross invoice totals and the net deposit received after merchant fees.

Caution:
We recommend checking in with your accountant before setting this up. This guide is just one way to handle bulk payments and tax requirements can vary quite a bit depending on where you're located. It’s always best to make sure the configuration matches your specific region's rules!

For more information from Xero on bulk payment reconciling please see this article below

https://central.xero.com/s/article/Reconcile-payments-received-from-online-sales#Handleacustomerrefund

What is a Clearing Account?

When a payment gateway settles funds into your bank account, they typically bundle multiple customer payments into a single deposit, net of their processing fees. To reconcile these accurately in Xero you must use a Clearing Account to bridge the gap between individual invoices and the bulk bank deposit.

Phase 1: Initial Setup in Xero

You only need to perform these steps once. Please log into your Xero account.

1. Create a "Bulk Payments" Clearing Account in Xero

  • Navigate to Accounting > Chart of Accounts.

  • Click Add Account.

  • Account Type: Current Asset.

  • Code: Your choice

  • Name: e.g., "Clearing Account" or "Bulk Payments".

  • Tax Rate: "No Tax (GST/VAT)" (as tax is handled on the individual invoices).

  • Crucial: Check the box "Enable payments to this account."

2. Create a "Merchant Fees" Account

  • If you don't already have one, create an Expense/Overhead account in Xero for "Gateway Fees." In most cases this account will be subject to tax but please consult your accountant for the correct tax treatment in your region. 


Phase 2: Initial Setup in Cloud Depot

Sync and Link in Cloud Depot

  • Log into Cloud Depot and go to Setup > Accounting Sync. Click Re-sync Accounting Info to pull in your new Xero accounts.

  • Go to Setup > Link Bank Accounts.

  • Select your Payment Gateway.

  • Link it to the Bulk Payments/Clearing Account you created in Step 1.

  • Note: If it was previously linked to your main business bank account, delete that link first.

 

 

How to Reconcile Payments

Follow these steps each time a settlement hits your bank account.

For WorldPay (Payrix) and GoCardless - Automatic reconcile for Xero is now available (recommended)

We now have a automated sync for Payrix and Xero that simplifies reconciliation with clearing accounts so you no longer need to follow the steps below.

For more information, refer to this KB article.

 

Step 1: Identify the Settlement Details

Your payment gateway will deposits funds a few days after transactions occur. Because these are "net" of fees, the amount in your bank feed will be lower than the sum of the invoices.

  • In Cloud Depot, go to Recurring Payments > Reports & Logs > Settlement Report.

  • Identify the specific settlement you are reconciling. Note the Gross Amount (total of payments) and the Fee Amount.

Step 2: Reconcile the Bank Deposit in Xero

  1. In your Xero Bank Reconciliation dashboard, find the deposit from your payment gateway.

  2. Click Add Details (do not use the 'Match' tab yet).

 

  1. Line 1: The Net Deposit

    • Account: Select your Clearing Account.

    • Amount: Enter the actual amount received (e.g., $1,601.75).

  2. Line 2: The Clearing Adjustment (The "Top-Up")

    • Account: Select your Clearing Account again.

    • Amount: Enter the fee amount as a positive number (e.g., $22.00).

    • This "tops up" the clearing account to the Gross total of the invoices.

  3. Line 3: The Merchant Fee Expense

    • Account: Select your Merchant Fees expense account.

    • Amount: Enter the fee amount as a negative number (e.g., -$22.00).

    • This records the actual cost to your business.

  4. Verify: The "Total" at the bottom should now exactly match the "Net" amount received in your bank feed.

  5. Click Save Transaction and then Reconcile.

Explanation why we do this:

Description Account Amount Why?
Settlement Clearing Account 1,601.75 Clears the cash received.
Fee Adjustment Clearing Account 22.00 Brings Clearing Account to Gross.
Merchant Fees Fee Expense -22.00 Records the expense.
Total   1601.75  

 

Step 3: Check the Clearing Account Balance

After reconciling, your Bulk Payments/Clearing Account should ideally sit at $0.00.

  • The individual invoices (pushed from Cloud Depot) "pay" into this account (Debit).

  • Your bank reconciliation "extracts" the money from this account (Credit).

  • If a balance remains, it usually means there are pending invoices that haven't been marked as paid yet or a settlement that hasn't cleared the bank.

Pro Tip: Always use the Cloud Depot Settlement Report as your "source of truth" for fee breakdowns to ensure your Xero ledger remains 100% accurate.