This article outlines how to allocate payments from Re-Leased Pay to different Charts of Accounts (COA), such as Undeposited Funds, rather than the default Bank type COA. This feature is beneficial for Connected Accounting customers who use bank reconciliation with their accounting software and wish to streamline their payment processing. This is not relevant to Client/Trust Accounting.
Understanding the Need for Non-Bank COA Allocation
Previously, Re-Leased only allowed payments to be processed directly to a COA categorized as Bank. This limitation required additional steps for users who needed to match payments with specific transactions via their accounting software's bank reconciliation feature. The common workaround involved manually transferring payments from the bank COA to an "Undeposited Funds" COA and then moving them once more upon clearance of the cash. This workflow resulted in extra effort and room for error.
Implementing the below process will allow for payments to appear in the Connected Accounting's Undeposited Funds account. This separates the funds from impacting cash reports run within the accounting platform.
It is particularly useful with Re-Leased Pay transactions, which will mark the Invoice as paid, but the funds have not yet been receipted/reconciled with the bank transaction. It will stay within the Undeposited Funds for quick reference and until reconciliation.
How to Allocate Payments to Non-Bank COA
Before you can allocate payments to a non-bank COA, you need to ensure that the desired account has the ability to mark payments against it activated.
Within Xero, to do this:
- Navigate to Chart of Accounts, under the menu option Accounting and Advanced.
- Select the Account you would like to allocate payments to or add a new one.
- Select the option Enable payments to this account.
- Save your changes.
Note: Once any changes have been made on the connected accounting software, a sync will need to be performed for those updates to flow through to Re-Leased.
Default Settings within Re-Leased Pay
Within the settings for Re-Leased Pay, there is the option to set a default Chart of Account for payments to be automatically allocated to. This should be changed to the Non-Bank Chart of Account that has been enabled for payments:
Summarizing the Workflow
When the payer proceeds with creating a transaction using Re-Leased Pay, this will automatically mark the payment on the invoice.
As long as the default chart of account has been selected as the Undeposited Funds, or desired non-bank COA, within the Re-Leased Pay settings, the funds will be marked against this rather than using the bank code.
This means that any cash reports within the connected accounting software are not impacted until the funds have been correctly reconciled when received.
By following these steps, Re-Leased Pay payments will now land directly in the desired non-bank COA, and you can continue with your reconciliations efficiently in your external accounting system without the need to shuffle funds between accounts/nominals.