When setting up two-step reconciliation for the Xero Middleware, you are required to have a clearing account in order for the disbursal to be held to reconcile against the relevant invoices. To set up your clearing account, follow these steps:
Login to your business Xero account.
From the top menu, click the Accounting tab (you may need to select this from the '+' icon).
Select Bank Accounts.
Click the +Add Bank Account button.
From the list of banks, select the bank you hold your account with.
If you are prompted to connect your bank directly to Xero, click Skip. Then in the small window, click the Don't connect my bank button.
Complete the Account name field - you may wish to enter 'Clearing Account'.
Under Account type, select Other from the drop down menu.
Enter false account details. This can simply be zeroes.
Click the Save & continue button.
You can now complete your two-step reconciliation configuration within the Xero Middleware.