What is a Clearing Account?
A clearing account (also known as a "bridge" or "temporary" account) is used to temporarily hold funds when a payment is in process but hasn’t yet been fully reconciled in your accounting system.
When using Bill.com, especially for batch payments, a clearing account helps ensure that your accounting system accurately reflects how money moves from your bank account to your vendors—without confusing or incorrect records.
❓ Why Is It Needed?
Most accounting systems (like Sage or QuickBooks) expect one-to-one matching between:
The bank transaction (what’s withdrawn from your bank), and
The invoice payment (what’s recorded against a vendor bill).
However, Bill.com makes payments in batches. For example, if you pay 10 invoices in one batch totaling $50,000, your bank statement shows one withdrawal—but your accounting system sees 10 separate payments. This mismatch makes reconciliation difficult.
That’s where the clearing account comes in.
🔄 How It Works (Step-by-Step)
🔧 Setup Requirements:
Before using this process, make sure:
A Clearing Account is created in your accounting system.
(Optional) A Dummy Bank Account is set up and mapped to the clearing account (required in some configurations).
🧠 Example Workflow:
Let’s say you’re paying 5 vendor invoices totaling $25,000.
✅ Step 1: Initiate Batch Payment in Bill.com
Bill.com sends a single withdrawal request of $25,000 to your bank.
✅ Step 2: Record Journal Entry
A journal entry is automatically created:
Debit: Clearing Account $25,000
Credit: Bank/Cash Account $25,000
This shows that funds have left your bank and are now sitting in the clearing account.
✅ Step 3: Apply Invoice Payments
As Bill.com marks each invoice as paid:
Credit: Clearing Account $5,000
Debit: Accounts Payable (or Vendor) $5,000
This happens for each invoice in the batch.
✅ Step 4: Reconciliation
All invoice payments are matched against the clearing account, not your bank account.
Your bank account only shows one transaction (the batch withdrawal), which aligns with the original journal entry.
No manual matching required—your system stays clean and accurate.
🎯 Benefits of Using a Clearing Account
✅ Simplifies Reconciliation
You no longer need to manually match dozens of invoice payments to one bank transaction.
✅ Eliminates Errors
Since entries are system-generated, there’s no risk of mismatching payments or duplicating entries.
✅ Streamlines Audits
Auditors and accountants can trace the full flow of funds clearly—from bank to clearing to vendor.
✅ Automates Your Process
No more manual journal entries or invoice tracking across systems.
💡 When Not to Use a Clearing Account
If you're processing individual payments (not batches), and your accounting system supports matching individual withdrawals to invoice records, then you might not need a clearing account.
But for most batch payment setups—especially with platforms like Bill.com—a clearing account is strongly recommended.