When Link My Books sends your settlements to Xero, we do so in the form of an invoice (almost always).
However, you may have noticed that we sometimes send your settlement as a bill instead of an invoice. This article will explain why we do that.
Since Xero does not allow negative total invoices, if you have a settlement which is for a negative amount then we have no choice but to send it as a bill instead.
Why would I have a negative settlement?
This can occur if your sales channel's fees and advertising costs are larger than your sales amount, if refunds outweigh sales for the payout period, or if the sales channel has reserved a large balance of your payout for future disbursement and it has made the balance of the payout negative.
Negative settlements are normal and can happen on any sales channel, not just Amazon.
⚠️ The way a negative balance is recovered depends on the sales channel
The reason a settlement goes across as a bill is the same everywhere: Xero won't accept a negative total. But how the negative balance is settled, and therefore how you reconcile the bill, is different per channel.
• Amazon charges your card on file, or offsets the balance against another marketplace using a cross-debt adjustment. Reconciled via the Amazon Reserved Balances account. See the Amazon sections below.
• Shopify does neither of these. There is no card charge and no cross-debt adjustment. See Negative settlements on Shopify below.
Please make sure you follow the section for your own channel. Applying the Amazon steps to a Shopify settlement will not reconcile it.
Negative settlements on Shopify
Yes, Shopify settlements can have a negative total, and when they do they are sent to Xero as a bill for the same reason as any other channel.
On Shopify this is most often caused by refunds outweighing sales within a payout period.
There is no card charge and no cross-debt adjustment on Shopify. Instead, Shopify allocates the negative balance to your Shopify Balances clearing account and recovers it from your funds, typically by deducting it from a later payout.
How do I reconcile a negative Shopify settlement?
Because the balance is recovered from your Shopify funds rather than paid separately, there is no standalone incoming payment to match the bill against. The deduction Shopify takes to cover the negative amount posts to the same Shopify Balances account, so the two sides cancel each other out.
Leave the bill posted as it is. It cannot be switched to an invoice.
When the offsetting deduction comes through on a later settlement, make sure it is also allocated to the Shopify Balances account.
The negative bill and the deduction then net to zero against each other in that account, so nothing is left outstanding.
💡 Do not use the Amazon guidance on a Shopify settlement
The cross-debt adjustment steps and the Amazon Reserved Balances account described further down this article apply to Amazon only. On Shopify there is nothing to match against a card charge, and adding a cross-debt line will not balance the bill. Use the Shopify Balances account as above instead.
⚠️ Expecting a negative Shopify settlement that hasn't appeared?
Link My Books imports settlement data from completed payouts reported by Shopify. If you can see a negative or withdrawn entry in your Shopify Finances section but no matching settlement has generated in Link My Books, please get in touch and include a screenshot of how the entry is presented on the Shopify side (the view under Finances showing the entry and its date range). That tells us whether Shopify has recorded it as a payout in its own right, and we can investigate from there.
Amazon: how do I reconcile a negative settlement sent to Xero as a bill?
On Amazon, a negative settlement is usually charged to the card you have on file, and Amazon produces a negative total settlement report.
To reconcile the bill against its corresponding charge to your card on file you will need to have the card you have on file with Amazon linked to Xero.
Then you match the payment on the card with the bill just as you would match a deposit from Amazon into your bank account against an invoice:
Amazon: what is a cross-debt adjustment?
When you have a negative settlement on one Amazon marketplace (e.g. Amazon.de), Amazon does not always charge your card on file for the full amount. Instead, Amazon may use a positive balance from another marketplace (e.g. Amazon.co.uk) to cover part or all of the debt. This is called a cross-debt adjustment.
This is an Amazon-only mechanism. It does not apply to Shopify or other channels.
In this case, you will see the following lines appear in your settlement reports inside Link My Books:
On the negative marketplace settlement: A line called "Cross-debt adjustment" or "Cross-marketplace adjustment" showing a positive amount that partially or fully offsets the negative balance.
On the positive marketplace settlement: A corresponding negative line showing the same amount being deducted from that marketplace's payout to cover the debt.
What scenarios can occur?
There are three possible outcomes when you have a negative Amazon settlement:
Card charge only: Amazon charges your card on file for the full negative amount. You will see a "Successful charge" line in the following settlement and a "Repayment of negative Amazon balance" line. Reconcile the card charge as described above.
Cross-debt adjustment only: Amazon fully offsets the negative balance using funds from another marketplace. No card charge occurs. The bill in Xero will need to be adjusted so that the cross-debt amount nets the total to the correct figure (which may be zero).
Combination of both: Amazon partially offsets the negative balance via a cross-debt adjustment and charges your card for the remainder. You will see both a "Cross-debt adjustment" line and a "Successful charge" line in the following settlement.
How do I reconcile a cross-debt adjustment?
The key principle is that the cross-debt adjustment reduces the amount Amazon charges your card. To reconcile:
Open the negative settlement (bill) in Xero.
Check the following settlement in Link My Books for "Cross-debt adjustment" and/or "Successful charge" lines.
If the cross-debt adjustment fully covers the negative balance (i.e. no card charge occurred), you will need to reconcile the bill without a bank transaction. You can do this by adding a line to the bill to net the total to zero, using the Amazon Reserved Balances account, then approving the bill so it is marked as paid.
If there is a partial cross-debt adjustment plus a card charge, ensure you match the bill against the reduced card charge amount. The cross-debt portion is handled automatically through the Reserved Balances account in the corresponding settlements.
Good to know: The cross-debt adjustment on one marketplace and its corresponding entry on the other marketplace both flow through the Amazon Reserved Balances account, so they cancel each other out automatically. You only need to take action if the negative settlement bill in Xero is sitting as "awaiting payment" with no matching bank transaction.
Amazon: small balance negative settlements
Lastly, if an Amazon settlement is negative and has a total of less than around £20 $ or € then sometimes Amazon chooses to roll their balance forward into your next settlement payout. The article linked below will explain more about this: