Do a year end in Xero
There are a few things that you should typically do at the end of your financial year. Whether you do some or all of them, or invite your accountant or bookkeeper into Xero to do them for you, here's a simple year-end process.
Before you start
Before you start, make sure you do these things for the financial period being closed:
- Bank account - Fully reconcile your account and ensure it agrees with your actual bank statement balance.
- Invoices - Enter and approve all invoices.
- Bills - Enter and approve all bills.
- Expense claims - Enter and approve all expense claims.
- Payments received - Bank all payments received.
- Advisor user role - Invite your accountant or bookkeeper to be a user.
Process the year end
Run a Sales Tax Audit. From here you can check that the sales tax categories and coding are correct.
- Run a Trial Balance.
- Reconcile all accounts on your Balance Sheet:
- Bank account - Make sure any unpresented checks or payments are correct. Check your imported bank balance in Xero against your actual bank balance from your bank. Use the Bank Reconciliation report to help with this.
- Run an Aged Receivables Summary and an Aged Payables Summary. Xero is designed to ensure the balances of your aged receivables and payables match your general ledger at all times. Write off any bad debts using the credit functionality.
- Ensure you know what makes up the balance of all accounts in your balance sheet, including loans and fixed assets.
- Let your accountant or bookkeeper know you have finished entering data so they can log in to your organization in Xero to see what you've done and potentially complete the rest of the process.
- Your accountant or bookkeeper can add journals and adjustments directly into Xero. They don't need to re-key this information.
- Your accountant or bookkeeper is likely to verify balance sheet items and add entries for:
- Year end manual journals
- Tax liability
- Work in progress
- Sales tax adjustments
In Xero there's no need to do a specific year end ('roll up') journal to bring the income statement balance back to 0.00. Xero's reports are created in real-time and in the case of the Income Statement it is run directly off the year-end date you've specified in Xero. So on any date the report is run it will be from the start of the financial year. Once the new financial year starts, as long as you haven't entered any transactions into Xero for that year, the Income Statement will show 0.00.