Xero sets out checklist to streamline year-end accounts

Xero has outlined a checklist-style workflow for small businesses preparing for financial year-end, focusing on bank reconciliation, invoicing, bill management, stock adjustments, and document handling within its accounting software.

"To prepare for your end of financial year, we're going to arm you with checks and tasks to complete in Xero so you're ready for a seamless year end. We want you to be able to hand your advisor a well-organised Xero file ready to go," said Fiona O'Farrell from Xero's education team.

The session framed year-end as a process that starts with complete transaction data in the general ledger. It also positioned organising supporting documents as routine bookkeeping, rather than a year-end-only task.

O'Farrell noted that for most New Zealand businesses, the financial year ends on 31 March. She said businesses need to provide their accountant or bookkeeper with financial data ahead of year-end so they can complete year-end tasks.

She added that recording all transactions in Xero with the right information, context, and documents can reduce an adviser's workload and costs, and help ensure expenses are correctly recorded.

O'Farrell also said businesses must submit an income tax return to Inland Revenue to calculate how much income tax is payable.

Bank feeds, matching, and consistent coding

The first step covered bank reconciliation across accounts, including credit cards, loans, and savings accounts. The focus was on clearing unreconciled statement lines and confirming balances match the bank statement.

"The first step to prepare for a smooth year-end is to ensure that you have all your business transactions entered into Xero. You can do this by completing a reconciliation of your bank accounts, accounts receivable, which is your sales, and accounts payable, which is your purchases," O'Farrell said.

She also emphasised reconciling all statement lines as of the year-end date.

O'Farrell highlighted features designed to standardise coding of cash transactions and reduce manual entry. She described auto suggestions, which reuse prior coding, and bank rules, which apply coding based on set conditions.

"With auto suggestions switched on, once you use the create feature, Xero remembers the coding and suggests it when you shop there again," she said.

"Bank rules give you full control over how a transaction is coded. You can set up conditions to capture a group of suppliers, for example, to pick up all petrol station transactions or itemise how a transaction is coded," she added.

She also pointed to an AI-driven matching option, "Jax", which Xero positions as an assistant that learns a user's categorisation patterns. The workflow included reviewing any reconciliations made automatically.

"You can actually let Jax, which is Xero's AI assistant, match transactions for you. Jax will learn how you categorise and reconcile transactions," she said. "And if it can't make a confident prediction, Xero will make a suggestion for you to confirm or edit."

Reports for verification and follow-up

The workflow then moved from entering and matching transactions to verifying balances and preparing reports for an adviser. O'Farrell highlighted the bank reconciliation report and the need to set the correct reporting period.

She said the Bank Reconciliation Summary Report shows closing balances, payments made, and any unreconciled statement lines for the selected period.

O'Farrell also addressed a common point of confusion for new users, distinguishing between Xero's balance (based on transactions recorded in Xero) and the statement balance (based on imported or manually entered statement lines).

Reconciling the account brings the two balances into line. If they do not match, she said users need to find and fix errors.

Invoicing and debtor management

The session then moved to accounts receivable and ensuring invoicing is complete before year-end. O'Farrell recommended checking for quotes and draft invoices that should have been sent, and noted options for bulk approval, emailing, and copying invoice details.

For recurring revenue models, she highlighted repeating invoices, which use templates to generate invoices on a set schedule and can send them automatically depending on settings.

The year-end workflow also included debtor follow-up and potential bad debt review using an aged receivables report. O'Farrell suggested adding contact details as report columns to support calls or emails to customers.

Bills, document capture, and stock adjustments

On the payables side, O'Farrell stressed entering supplier bills with supporting documents, particularly for larger or more complex expense categories such as major purchases, legal costs, and insurance. She also referenced Hubdoc for capturing documents and extracting bill data.

"Two tools to help you manage your bills and prepare for the end of the financial year are the Aged Payables Summary Report and HubDoc," she said.

"HubDoc allows you to take pictures of your bills on the fly, and it's then going to create them as draft bills in Xero," she said, adding that it is included in all Business Edition plans.

For product-based businesses, she recommended running an inventory item list report to support stocktake and posting inventory adjustments. She noted that stock can be adjusted throughout the year, not only at year's end.

File library and adviser access

The workflow closed with document handling and adviser access. O'Farrell described using Xero's file library, including an email-in option that lets users send documents to a unique organisation email address so they appear in the file library. She also noted users can attach files during bank reconciliation and invoice creation.

She said invoice attachments are internal by default, unless a user selects an option to include them with the online invoice.

With transactions entered and documents uploaded, O'Farrell recommended inviting an accountant or bookkeeper into the Xero organisation to access business data. She emphasised the importance of engaging an expert to help complete year-end requirements.