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How to Undo an Incorrect Reconciliation | Using the Remove and Redo Feature in Xero

You've confirmed a transaction was manually or incorrectly reconciled (see Why Did My Transactions Stop Auto-Reconciling?) and need to undo it.

This is the part that's easy to get wrong, because the fix depends on where you undo it.

Path A — Undoing from Account Transactions ("Remove and Redo")

Use this when the entry was a journal-type entry pushed from Pencil (not a straightforward bank statement line).

  1. Go to Account Transactions.
  2. Click Search and filter by amount, date, or status to find the incorrectly reconciled item.
  3. Tick the checkbox for that specific transaction (not just any line).
  4. Click Remove and Redo.
  5. The item now drops back into the Reconcile queue (you'll see the "to reconcile" count go up by one).

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⚠️ Critical extra step: Removing and redoing from Account Transactions does not automatically re-link back to Pencil. After doing this, you'll also need to:

  1. Go to Pencil Admin → Disbursements, find that same disbursement, and click Resync.
  2. Only after the resync will it correctly reappear and be ready to reconcile/match again in Xero.
Path B — Undoing from Bank Statements ("Restore")

Use this when you're undoing the reconciliation from the bank statement line itself.

  1. Go to Bank Statements.
  2. Tick the checkbox next to the reconciled transaction.
  3. Click Restore.
  4. Go back to Reconcile — the auto-reconciliation suggestion will reappear on its own.

✅ No separate Pencil resync needed in this path — restoring from Bank Statements keeps the link intact and Xero's auto-match picks it back up.

Summary rule of thumb
Where you undo it What happens Extra step required?
Account Transactions → Remove and Redo Breaks the link back to Pencil's disbursement Yes — resync the disbursement in Pencil Admin
Bank Statements → Restore Keeps the link intact No — auto-reconcile reappears in Xero automatically
Related articles
  • Why Did My Transactions Stop Auto-Reconciling?
  • Transaction Not Auto-Matching in Xero