The reason I want running account balances is because it allows me to double-check balances as of a certain date in time, to make sure that some rogue unreconciled transactions aren’t providing inaccurate numbers. And while you can use it in this way, the Bank statements tab is the best place to reconcile transactions.
The key reason the Bank statements tab is more useful for reconciliations than the Account transactions tab lies in the difference between transaction dates and posting (clearing) dates.
Even if you enter a transaction into Xero on January 1, it might not clear (be posted to) your bank account until January 10. So if you have a bunch of transactions going through your bank account, the running balance in the Account transactions tab may never match up with your bank statement balance. However, because the Bank statements tab uses the posted date, you can check its balance as of a certain date in time against your real account balance found in your online banking (or physical bank statement). With a properly reconciled account, they should always match up.
Once I realized that running balances in the Account transactions tab wasn’t as useful for reconciliations as I thought, I was a bit disappointed. However, after reading this Xero blog post I was pleasantly enlightened regarding another possible use of running balances in the Account transactions tab. Provided your books are reconciled properly as of a certain date, you can use the running balance to figure out your cashflow.
Well, if you enter into Xero transactions for payments spent or received that haven’t cleared your bank yet, you can get a good idea if you have enough cash in the bank after all the transactions clear. This is because the Account Transactions Balance will show all the reconciled and unreconciled transactions.
Furthermore, if you have future-dated transactions you can see their impact on your account balance. They’ll be in grey to signify that they’re in the future.
You should note that the Balance in Xero number shown next to your Statement Balance is your present day balance (in the screenshot below this is Nov 15, 2016 date). The running account balances lets you easily see what your balance will be in the future after all post-date transactions clear.
For all of you who’ve already figured out this use of running balances, feel free to write, “Duh” in the comments.