How to explain bank transactions

This article describes how to explain bank transactions that have been imported into FreeAgent via a bank feed or uploaded from a bank statement.

Identifying unexplained transactions

Navigate to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop-down menu.

Choose the relevant bank account from the list of accounts.

Unexplained bank transactions will be displayed in red in your business bank accounts in FreeAgent and can also be found in their own dedicated 'Unexplained' tab.

Any bank account that you haven't indicated is a personal account in FreeAgent is classed as a business bank account. Unexplained transactions in personal bank accounts are displayed in grey. You can explain them, but leaving them unexplained won’t impact your business accounts.

How to explain a bank transaction

When you access any of your business bank accounts in FreeAgent, you’ll see all the transactions for the current month, including unexplained transactions. You will also see a list of unexplained bank transactions from previous months (if applicable), along with the total number of unexplained transactions in that bank account. It's a good idea to explain transactions in chronological order if you can.

You can either select a month from the 'Unexplained' transactions tab and choose an entry to explain, or select one of the unexplained transactions from the main view of bank transactions for the current month.

Once you’ve selected a transaction to explain, FreeAgent will ask you to provide some information about it.

Choosing a payment type and category

Select the appropriate payment and category type for the transaction from the list of options in the ‘Type’ and ‘Category’ drop-down menus.

Selecting the appropriate rate of VAT (for VAT-registered businesses)

The list of categories in the drop-down menu indicates which categories are normally VAT-able. If you choose one of these categories and your business is registered for VAT, FreeAgent will automatically calculate the VAT on the transaction for you if you choose ‘Auto’ from the VAT drop-down menu.

You can also choose a specific rate of VAT from the drop-down menu or enter a specific amount manually. To do this, choose ‘Amount’, and type the amount of VAT into the new box that appears.

If your business is not VAT-registered, FreeAgent will automatically ignore the VAT setting (unless you register for VAT in the future), so you don’t need to make any changes here.

Entering a description and adding an attachment

Enter a description of the transaction. It can be helpful to have this on record in case your accountant needs more notes or your books are inspected by HMRC.

If you have any paperwork that relates to the transaction (e.g. a receipt), you can attach a scanned copy to the explanation by selecting ‘Upload a file’ from the 'Attachment' area and following the instructions.

If you used the FreeAgent mobile app to capture an image file and save it to the 'Files' area of your account, select 'Choose from saved files' instead and follow the instructions. Please note that attaching an image file to a transaction will remove it from the ‘Files’ area of your FreeAgent account.

If you have attached a file to an email template, the file will be locked in the ‘Files area’ and you won’t be able to attach it to a transaction. If you want to attach a locked file, follow these steps.

Explaining multiple bank transactions

If you have more than one transaction that you need to explain in the same way, tick the checkboxes next to the relevant transactions and enter the explanation information in the panel to the right. This will explain all the selected transactions in the same way. Remember to include an appropriate description for the selected transactions. If you leave the ‘description’ field blank then the transactions will be given the original descriptions that came through for them via the bank feed import or bank statement upload.

This feature works with all bank account types, including PayPal accounts, and is currently available for the following types of transactions:

• Money in > Sales
• Money in > Refunds
• Money in > Money Received from User
• Money in > Transfer from Another Account
• Money out > Payments
• Money out > Sales Refunds
• Money out > Money Paid to User
• Money out > Transfer to Another Account

To quickly select all the transactions on a page, tick the checkbox for one of your transactions, and then tick the box to the left of ‘Date’, just below the time period drop-down menu. This will select all the other transactions listed on the page. Please note that you can't explain ‘Money In’ and ‘Money Out’ transactions at the same time. Instead, you'll need to explain one type of transaction first and then the other.

Explaining similar bank transactions

Depending on how you explain the bank transaction, FreeAgent may invite you to explain any similar unexplained transactions to the same category.

You will see a notification that there are matching entries to choose from. Select ‘More options’ to view the details of the matching transactions.

To accept the suggested explanation for the unexplained transactions, choose them and select ‘Create New Explanation’.

FreeAgent won’t prompt you to explain similar unexplained transactions for the following transaction types:

• Invoice receipt
• Bill payment
• Bill refund
• Credit note refund

Linking outgoing bank transactions to projects

The 'More options' page includes the option to link outgoing bank transactions to projects and to rebill those transactions to clients if appropriate. To go straight to the 'More options' page, you can press the 'Alt' key at the same time as selecting a bank transaction.