Table of Contents
1. What is the Bank Explain process?
1.2 Access Bank Explain via Imported Statements
1.3 Access Bank Explain via Manage money
2.1 Explaining transactions that do not require an invoice
2.2 Allocate transaction to an existing unpaid invoice
2.3 Reconcile a transaction to a paid invoice/bill
2.4 Creating unallocated receipts
2.6 Transfers to/from another bank account in Clear Books
2.9 Loan payment with interest
1. What is the Bank Explain process?
The 'Bank Explain' process makes sure your real-world bank transactions match your accounting records in Clear Books.
Real-world bank transactions are imported into Clear Books directly via our live Plaid bank feeds or importing bank statement files. The user can then simply ‘Explain' these imported transactions by deciding how they fit into your books.
Here are the most common examples:
Payment for an unpaid sales invoice or purchase bill: Clear Books creates the accounting record for the bank payment, and marks the invoice or bill as paid.
New business expense or income not yet recorded in Clear Books: the user simply specifies the type of expense or income, and the software creates both the accounting expense or income record and the accounting bank transaction record.
Recording a transfer made between two of your bank accounts, for example from your current account to your savings account.
Matching with a bank transaction already recorded in Clear Books; if the accounting records are already up to date, it simply marks the accounting record as reconciled.
Different businesses may use Clear Books to:
Create all records directly from imported real-world transactions.
Record bank transactions in Clear Books first and reconcile them with imported transactions later.
A combination of both approaches.
In all cases, the 'Bank Explain' process ensures that Clear Books reflects the actual bank account and that your financial records are up to date and accurate.
1.1 The Bank Explain screen
The Bank Explain screen offers several methods for explaining bank transactions. You can access this screen either by explaining transactions from an imported bank statement or by using the manage money options for each bank account.
1.2 Access Bank Explain via Imported Statements
Once a bank statement has been imported or re-created, it will typically contain a list of transactions that need to be explained. There are several methods for importing a bank statement:
- Importing a CSV file
- Re-creating a statement
- Importing a statement via bank feeds
- Connecting PayPal and utilizing the auto-import feature
- Connecting Stripe
When an imported statement is ready for explanation, the relevant bank account will show the new transactions that are awaiting explanation:
1.3 Access Bank Explain via Manage money
The manage money options allow you to explain one transaction at a time on an adhoc basis.
To access the Bank Explain screen just head to the Money > Bank Accounts menu and select 'Money in', 'Money out' or 'Transfer' beside the appropriate bank account. You may need to click on the down arrow to show these options.
You will then need to complete a form, entering the amount, date, description and payment method of the transaction.
Clicking the 'Explain' button will direct you to the bank explain screen, where you can choose a contact, account code, VAT rate, and other relevant details.
2. Explaining Transactions
Transactions on the bank explain screen can be explained in several ways, which are listed below:
2.1 Explaining transactions that do not require an invoice
To create a transaction on the bank explain screen, select the appropriate contact, account code, and VAT rate from the drop-down menus. Then, click "Save" to complete.
This will generate an "REC" transactions which are generated exclusively through the bank explain screen and can be used when you don't need to issue an invoice.
2.2 Allocate transaction to an existing unpaid invoice
You can allocate receipts to unpaid invoices from the Bank Explain screen. Unpaid invoices, by default, are created on the sales menu and have the prefix INV.
To do this, select the relevant contact from the drop-down menu on the Bank Explain screen. The system will then display all outstanding invoices. You can then click "Allocate” for the relevant transaction to complete.
Please note: You often won't need to enter a contact, as the system should match invoices based on the amount.
2.3 Reconcile a transaction to a paid invoice/bill
If a bank transaction matches a paid invoice, you can mark it as reconciled on the bank explain screen by clicking "Reconcile."
2.4 Creating unallocated receipts
When explaining a receipt, you have the option to save it as unallocated. This action will create an unallocated receipt within the system, which can then be allocated to invoices at a later time.
2.5 Explain as an invoice
On the sales menu, unpaid invoices are generated by default and are prefixed with INV. You can also create an INV invoice directly from the bank explain feature by adjusting the invoice date field.
2.6 Transfers to/from another bank account in Clear Books
You can explain a payment or receipt as a transfer to/from another bank account using the "Transfer" tab. This action will update the bank account balances for both accounts in Clear Books.
2.7 Refunds
To process a customer refund, navigate to the bank explain screen and select the "Refund" tab. Choose the correct contact, account code, and VAT rate from the respective drop-down menus. Finally, click "Save" to complete the transaction.
2.8 Bank Charges
To account for a bank charge when explaining a transaction:
- Select the transaction.
- Enter a negative value that matches the bank charge incurred.
- Assign this to "Bank Charges" and select the bank as the contact.
- Add this as a new transaction.
- The remaining value of the original transaction should now reflect the amount before the bank charge was applied. This amount can then be allocated to the relevant invoice or bill.
2.9 Loan payment with interest
If the loan has been set up as a bank account in Clear Books, explain the full loan repayment amount by switching to the "Transfer" tab on the business bank account and transferring it to the loan bank account contact.
To account for the interest, a journal entry is required. This entry should credit your loan account and debit the interest expense account code within Clear Books, accessible via the Tools > Journals menu.
