Xero year-end checklist: close the financial year in Xero

Year end in Xero is less dramatic than it sounds. There's no closing journal to post and no button to press. What matters is getting the year's figures right before your accountant starts, then locking the period so nothing changes afterwards. Here's a checklist you can tick off as you go (it remembers your ticks in this browser, and you can print it), followed by notes on each step.

Xero doesn't need a year-end close

Xero's reports run in real time from the financial year end you've set, so there's no formal close or roll-over journal. On the first day of the new year the Profit and Loss simply starts from zero. On the Balance Sheet, this year's profit shows in the Current Earnings system account, and earlier years' profit sits in Retained Earnings. Current Earnings is locked, so you can't journal to clear it; distributions to owners usually go to a separate equity account such as owner drawings.

The financial year end lives under Accounting > Accounting settings > Financial settings. It sets the date range for reports. Be careful changing it once you have history: Xero offers a transition period so past data stays as it was. Changing it without one overwrites past periods and reverses fixed asset depreciation. If you use fixed assets in Xero, the year end has to be a month end.

Common year-end dates

• UK: companies choose their own year end (the accounting reference date). The tax year ends on 5 April. Sole traders and partners can use 31 March instead, which HMRC treats as equivalent for basis period purposes.
• Australia: the income year runs from 1 July to 30 June, unless the ATO has approved a different period.
• New Zealand: the standard balance date is 31 March; a different date needs IRD approval.

Notes on the steps

Accountant access. Invite your accountant from Settings > Users as an administrator. It's free, the invite lasts 14 days, and only administrators can run depreciation or set lock dates, which they'll likely want to do.

Banking. Reconcile each bank account to the actual year-end statement, not just to "nothing left to reconcile". The Bank Reconciliation report lets you enter the statement's closing balance and shows if anything is out.

Bad debts. If a customer is never going to pay, write the invoice off by creating a credit note against it, coded to a bad debts expense account. If you account for VAT or GST on a cash basis, the treatment differs, so check with your accountant.

Depreciation. Run it from Accounting > Fixed assets > Run depreciation up to the last day of the year; Xero runs at most one financial year at a time. It won't run into a period locked for all users, so do it before you set the lock date. The Fixed Asset Reconciliation report checks the register against the balance sheet.

Payroll. Each country has its own year-end step. In the UK, send the final FPS for the tax year and give employees their P60s by 31 May. In Australia, finalise Single Touch Payroll data by 14 July, later for closely held payees (Payroll > Single Touch Payroll > Finalisation). In New Zealand, keep payday filing up to date.

Reports. Xero's Reconciliation Reports pack bundles the Trial Balance, the aged summaries, the bank reconciliation summary, the fixed asset reconciliation, general ledger exceptions and the journal report. It's a good thing to run, review and send to your accountant together with the year's Profit and Loss and the closing Balance Sheet.

Lock date. Once your accountant has finished, set a lock date at the year end under Financial settings > Lock Dates. You can lock everyone except administrators (so your accountant can still make adjustments) or lock all users.

Sending the year-end figures

If you'd like your accountant or directors to get the year's Profit and Loss and Balance Sheet without you exporting them, Reportpost can email them from Xero on a set day, as PDF, Excel or CSV. Choose the "Last financial year" period for the full year, or keep a monthly schedule going so nobody waits for year end to see the numbers. You can try the demo without connecting Xero.

For the balance sheet step, see a Xero balance sheet reconciliation checklist.

Related: the Xero month-end checklist, emailing the trial balance and the Xero debtors report explained.