A bank feed brings every transaction into your accounting software automatically, but it only tells you that money moved. Matching is the step where you say what each movement was. Done well, it settles the right invoice, clears the right supplier balance and leaves the bank reconciled. Done badly, it creates a second copy of income or costs that are already in the books.
For how feeds connect and what can go wrong with the connection itself, see bank feeds in accounting software.
Match or create? The first decision on every line
| The bank line is… | What to do | Why |
|---|---|---|
| A customer paying an invoice you issued | Match to the open sales invoice | The invoice already holds the sale and VAT; creating income again would double it |
| A payment of a supplier bill already entered | Match to the open bill | Clears the supplier balance |
| A card purchase with a receipt but no bill entered | Create a spend transaction with the receipt attached | There is nothing to match to |
| Bank charges or interest | Create, usually via a rule | The statement is the only document |
| A transfer between your own accounts | Match to the transfer on the other account | Neither income nor expense |
| A payroll, HMRC or VAT payment | Match to the liability (net wages, PAYE, VAT) | The cost was posted by the payroll or VAT journal |
The common mistake is the third row applied to the first: a customer receipt “created” as new sales. The open invoice then stays unpaid, turnover is overstated and output VAT is counted twice.
Matching that is not one-to-one
One receipt, several invoices
A customer pays £4,560 covering invoices 1041, 1043 and 1050. Use the remittance advice, or the reference on the payment, to select all three invoices against the single bank line. If the remittance is missing, allocate to the oldest invoices first only if that is your agreed policy, and ask the customer to confirm.
Several receipts, one invoice
A customer pays an invoice in instalments. Match each bank line to the same invoice; it stays partly paid until the last one arrives. See partial payments from customers.
Batched payouts from card processors and marketplaces
A payout from a card terminal provider, Stripe or a marketplace is usually many sales minus fees and refunds, paid as one amount. Do not match the payout directly to sales invoices. Route it through a clearing account: the sales and fees go into the clearing account from the provider’s report, and the payout clears it. The structure is explained in card payment clearing in the chart of accounts.
A fee deducted from a payment
An overseas customer’s payment arrives £18 short because of an intermediary bank charge. Match the receipt to the invoice and record the £18 as bank charges in the same matching step, so the invoice is fully settled. Do this only when you know the difference is a bank fee, not a disputed amount.
Make matching easier at the source
- Ask customers to quote the invoice number as the payment reference. Put the instruction on every invoice.
- Pay suppliers with their invoice number as your reference, so their remittance and your bank line agree.
- Keep the sales and purchase ledgers up to date before matching. A feed line cannot be matched to an invoice that has not been entered.
- Match little and often. A few minutes a day is far quicker than a month of lines with fading memory.
Automatic suggestions and rules
Software suggests matches based on amount, date and reference. Treat a suggestion as a suggestion: two invoices of £1,200 to different customers are easy to mix up. Automatic rules are useful for genuinely repetitive lines with no document, such as monthly bank charges, but risky for anything that should settle an invoice. Review your rules regularly; the bank feeds in accounting software explains what to look for.
Lines you cannot match
Some lines will not match anything: a receipt with no reference, a payment you do not recognise. Do not force them into an income or expense account. Post them to a holding account for unidentified items, investigate within a set time and clear them; the steps are in unidentified payments and clearing entries.
At month end
Before you close the month, every feed line should be matched or explained, the software’s bank balance should equal the statement, and the list of unpaid sales invoices should only contain invoices customers really still owe. If a customer says they have paid and your ledger disagrees, the unmatched list is the first place to look.