How to do end of financial year on Xero
The end of the financial year can be a stressful time for businesses, particularly within finance teams. Companies of all sizes will be familiar with some of the problems that can arise as the deadline looms. the health of your business and therefore it is important that you wrap up the financial year correctly.
Once you’ve identified any discrepancies, keeping on top of key dates and submissions can help to prepare a closing schedule, and ensure you give employees plenty of notice to submit outstanding paperwork.
Many organisations rely on accountancy software to help simplify the process. Using a tool such as at the end of the financial year can increase visibility into any missing information, with digital reports that are generated automatically. But what exactly do you need to do to end the financial year on Xero?
End of financial year: your responsibilities
A company’s full accounts comprise a number of elements, and need to be filed with HMRC and Companies’ House. But what needs submitting where, and when?
All required accounts can be signed and submitted within Xero.
Why is end of financial year so difficult?
Preparing for year end is no easy feat for finance teams. Keeping an accurate record of a year’s worth of spending can be challenging, and reconciling any missing receipts and invoices can be time consuming.
Poor communication can also be a problem. Where accounts departments rely on employees to correctly log their expenses, it can feel like most of the year end period is spent chasing missing expense documentation, or constant back-and-forth in email chains.
Spreadsheets are often the backbone of a busy financial team, but manual data entry can be subject to human error.
Fortunately, accounting software can provide solutions to make the year end process run more smoothly. At MSP Chalkdell, we use Xero for end of financial year accounting. Its invoice inventory feature is particularly useful when closing a period, with users simply photographing and uploading receipts and invoices directly to Xero.
How to do end of financial year on Xero
Our best advice for improving your year end process, is to stay on top of your accounting processes year round. Keeping accurate monthly accounts can make all the difference at financial year end. However, implementing these processes can take time – and many of them can be sped up with the correct accounting software.
So, how do you complete end of financial year on Xero? Because it does not have a formal year end close process, no roll- ups are required on Xero. Instead, reports (such as profit and loss) are created in real-time. From the start of the financial year (specified in your Xero set-up), these reports automatically run and will reset to zero at the close of the year. If accounts are kept up to date, all reports will be automatically generated in real-time.
Xero end of financial year checklist
To ensure that all accounts are up to date, and reports are correctly generated, businesses will need to complete a number of tasks when completing the financial year end using Xero:
- Fully reconcile all bank accounts associated with the business, and cross-reference with bank statements to ensure they are agreed. Xero’s Bank Reconciliation Report can help to identify and correct and mistakes
- Ensure that monies owed to and by the business are correctly logged, and run an Aged Receivables Summary and an Aged Payables Summary
- Check VAT returns and balances, then run a VAT reconciliation report
- Go through balance sheets and carefully compile a year end journal from monthly journal entries. Xero users can set up an automated recurring monthly journal, to make this a little easier
- Run a Trial Balance Sheet, and make necessary adjustments for accruals, tax, depreciation et. After all reports have been run, you will simply have to set a lock date, so no further changes can be made to that year’s accounts.
Do you need an accountant?
The end of the fiscal year can be complex, often requiring technical expertise. As mentioned above, the best way to prepare for year end is excellent year-round management of company books.
The help of a knowledgeable accountant can be invaluable. As well as guiding you through year end, they can help you set up processes and systems to effectively manage your company finances. If you’re using accounting software, like Xero, choose an accountant who is a specialist on your chosen platform.
If your finance team need a little extra help at these critical periods, but a full time accountant isn’t necessary for your business all year round, outsourcing can be an excellent, cost effective way of accessing the additional support you need, when you need it.
Outsourced accounting with MSP Chalkdell
MSP Chalkdell offers bookkeeping packages for businesses of all sizes and sectors. Whether you require ongoing monthly support, or ad hoc help for times such as the end of the financial year, we offer flexible outsourced support packages to meet a wide range of needs and budgets.
To discuss your running the financial year end with Xero, contact MSP.