How to find (and remove) phantom income in Xero
Phantom income is revenue your books say you earned but that never actually landed in the bank. It quietly inflates your turnover — and the GST you report on it. Here’s where it comes from, how to spot it, and how to take it out without wrecking the accounts.
Where it comes from
Phantom income isn’t usually fraud — it’s drift. The common sources: a payment counted twice; a batched processor payout booked as fresh income on top of the invoices it was already settling; an integration misfiling the same money more than once; or a previous “fix” that added entries to force a balance. Each leaves income on the books with no real deposit behind it.
How to spot it
Test against the bank. Line up recorded income for a period against the actual deposits that landed in the bank for the same period. Anything in the books with no matching bank movement is a phantom candidate. The downloaded bank statement is the source of truth here — not the live feed, which has gaps and timing quirks.
How to remove it safely
Reverse each phantom by name: an offsetting entry that references the original and is backdated to the period it belongs in, so the P&L stays accurate quarter by quarter. Avoid a single blanket write-off — it hides what was wrong and won’t survive an accountant’s review. And because phantom income overstates GST, fix the books first, then let your accountant handle any BAS amendment.
Income looks higher than it should?
Extrua Reconcile hunts phantom income against the bank truth and reverses it by name, evidenced.
FAQ
What is phantom income?
Income recorded in the books that never actually arrived as money — usually because a payment was counted twice, a payout was booked on top of the invoices it was settling, or a prior fix left revenue that has no real deposit behind it.
How do I spot phantom income in Xero?
Compare recorded income against the real money received in the bank for the same period. Any income with no matching bank deposit is a phantom candidate — the bank statement is the truth to test against.
How do I remove it without wrecking the accounts?
Reverse each phantom by name — an offsetting entry referencing the original, backdated to the right period — rather than a single blanket write-off. That keeps each period accurate and leaves an audit trail.