The end of the financial year is approaching and this is a good time to get your bookkeeping file in order so you can start the new year fresh. It is much easier to plan for the new financial year if you don’t have a messy file to deal with. Here are a few things you can do to get your Xero file in order.
Even though you may have set up automatic bank feeds, it is also good practice to check the balance in Xero against the bank statement on a regular basis.
Make sure that all transactions have been reconciled in your Xero file, then run the Bank Reconciliation Summary report. Once you have done this, obtain a copy of your bank statement and match the balance to the Bank Reconciliation report. Hopefully these balances agree, however if this is not the case, you will need to do some further investigation.
There are a few reasons why the balances don’t agree. There could be missing bank statement transactions, duplicate entries, deleted items or manual bank transactions that have been entered. Un-reconciled transactions are an indication of duplicates, so check the bank reconciliation report for any Un-reconciled Bank Statement Lines. You can also check the Statement Exceptions tab on the Bank Reconciliation report for any entries that could be duplicates.
If you need more assistance, review this article from Xero for more information.
You may review your Accounts Payable on a regular basis, but now is a good time to take a closer look. Run an Aged Payables report and review the balance for each supplier. Are there any duplicates? Are there any unallocated credit notes? Check the balances to your supplier statement and make sure balances are correct.
Another good thing to check is the draft bills. There may be draft bills that need to be approved. Also make sure all bills for June have been entered. A good way to help with this process is to use a document collection service like Hubdoc. Hubdoc is now included with most Xero subscriptions and makes the process of entering bills much easier. You can find out more about Hubdoc here.
Check for any bills that should be paid before the end of the financial year. If you are on a cash basis for GST, this will mean that you can claim the GST in the June quarter.
It is also a good idea to review the balance of trade debtors or accounts receivable. Run an Aged Receivables report. Similarly to accounts payable, you should also check whether there are any duplicate entries or credit notes that need to be allocated. Check whether there are any draft invoices that need to be approved. Make sure all invoices have been entered. Once June invoices have been entered, send out June statements to customers.
The Accounts Receivable detail report In Xero can be customised to include additional details such as the customer’s contact person and phone number. By adding this information to the report, you can easily follow up any outstanding amounts.
It’s a good idea to review any amounts that have been outstanding for a long period of time to see whether they should be written off as a bad debt. To be able to claim a tax deduction for your bad debt, it must be written off in the year in which the deduction is claimed. Before you can write off a bad debt, you need to be able to show that you have taken necessary steps to be able to classify the debt as bad. For example, you must be able to demonstrate that you have sent reminder letters, called the debtor, given a reasonable time to pay the debt or issued a final demand.
Did you know that you can now set credit limits for each customer in Xero? This allows you to receive a notification when an invoice is entered for a customer that is going to go over their credit limit. This can help prevent bad debts occurring in the future. Instructions on how to set credit limits are here.
There is a new Inventory Item List report in Xero that you can print out and use to prepare your stocktake. This report can be exported as a PDF or Excel file. Once you have carried out your stocktake, make any adjustments to your inventory values in Xero.
Chart of accounts
A regular review of your chart of accounts can keep your Xero file neat and tidy. If you have accounts that are not used, archive these accounts (delete if nothing has been posted to this account). Look for any duplicate accounts. The account General Expenses should not be used as a main posting account so if it is being used frequently, consider archiving this account.
Keeping your contact list tidy can also help to avoid problems such as overpayment to a supplier. Check for duplicate contacts. You can merge a duplicate with the main contact. Contacts that are no longer used can be archived. To make processing faster, you can add default account codes and tax rates to contacts. Also make sure bank account details are recorded to make payment processing easier.
Fixed asset register
Review your fixed asset register. Are there any assets which have been scrapped and should be written off? Have all new assets been entered into the asset register? You can run a Depreciation Schedule report in Xero. This may be something that your accountant looks after but it is always a good idea to check the register to make sure everything is in order.
Profit and loss and balance sheet
Run a Profit and Loss report and Balance Sheet report for the financial year and compare to the prior year. On the Profit and Loss report, check whether there are any items that have changed significantly from the prior year. On the Balance Sheet report, check that there are no unusual items, for example, suspense account and payroll clearing account should be reconciled and should not have a balance.
Make sure to reconcile your payroll before you submit to the ATO for the end of the financial year. A good report to run is the Payroll Activity Summary report and then compare the information in this report to your general ledger. If you have opted in to Single Touch Payroll (STP), you will need to finalise your STP data and send it to the ATO before the relevant due date in July.
End of year documents
As you are getting your information ready for the end of the financial year, the Files section of Xero is a handy place to store your documents. You can upload or email files to the inbox. These files can also be sorted and collated in folders which are easy for your bookkeeper or accountant to access.
Need help with your Xero file?
At Passion Business Advisors, we love using Xero. If you need help getting ready for the end of the financial year, please contact us. We are 100% virtual. However, if you would prefer an onsite visit, we service the areas of Albury, Wodonga and Griffith.