Actionstep uses a two step process when processing payments. While the application of a Credit will complete in Xero, it does so in a different manner.
See this video for the complete process
It will create a payment (deposit) against the invoice you are applying - effectively closing the invoice but leaving the receipt in your bank.
It will not apply against the Credit.
Your Client now doesn't have an open invoice, but does have an open Credit and your bank has a receipt transaction where funds were not received
In Xero you will need to go to the Credit and make a payment against it. This will give you a withdrawal to the bank account.
The Client will now not have either transaction open in the Aged Receivables.
Your Bank will have an offsetting deposit and withdrawal.