Part 8 - End of Year Reports & Budgeting

This post is the final one for the Intermediate Guide to Using Xero Accounting and it follows from Part 7 - Reports in Xero

In this post, we’ll go through:

  • End of Financial Year activities to help you with EOFY tax returns
  • How to set up a budget so that you can set targets for income and spending.

End of Financial Year Accounting

Here are some things you should do in Xero to clean up your accounts so that they’re ready for your tax accountant. The more you clean up, the less there is for your accountant to do and you’d expect the bill to be lower.

Don’t worry if there’s quite a few things to fix up. That’s quite normal. Cash comes in at different times and human entry can mean that “errors” occur. Just fix these up so that your end of year reports are correct - because your tax will rely on that!

  • Bank Reconciliation Summary - make sure all your bank reconciliations have been done. The balance in Xero and your bank account should be the same. If it’s not, investigate and fix. You’ll be able to pick up a multitude of errors with the bank reconciliation summary alone.
    • Click “Statement Exception” tab as this identifies transactions that may result in the reconciliation balance in Xero not matching your bank statement.
  • Suspense or clearing accounts - the balance of these accounts should be zero. Clear these transactions.
  • Aged Receivables and Aged Payables - do you have any bad debts (that when people haven’t paid you and it’s unlikely that you’ll recover those funds) or do you owe money?
  • Complete records - make sure you have appropriate documents to support purchases. E.g. Upload in the upload function any receipts and tax invoices. Remember to also keep a back up copy of your records elsewhere. For example, I use cloud storage for receipts and tax invoices.
  • General Ledger Exceptions Report - go to Reports and find this report. For balances that appear odd, see if they are justified (is there a legitimate reason?).
  • Fixed Assets - review that all your assets are in here. This will be needed for your accountant to run depreciation.
  • Quick report check - have a look at the Profit and Loss and Balance sheet reports to make sure that the change from last year to this year makes sense.
  • Export Data - export your general ledger to Excel. Go to Reports > All Reports > General Ledger and click the button that exports to excel. Store this just for your records. While everything is in Xero, if things change e.g. if you decide to leave Xero, you’ll need the data so keeping data is good practice.


What’s a budget? A budget is where you say you’re expected to bring in x amount of $ and spend x amount of $ over a certain timeframe. Then you measure what you actually spent compared to what you budgeted.

Why do people do this?

To control spending and to make sure the business is performing in line with expectations. Of course, sometimes our expectations change, however, it’s good to set targets because if our actual performance does not meet our targets we can investigate why and then take corrective action if needed.

Xero makes it easy to create a budget. So to create a 12-month profit and loss budget, just follow these steps:

  1. Go to Reports > Budget Manager.
  2. At the “Select Budget” field heading, use the drop-down and select “Add New Budget”
  3. Add a name e.g. “Annual budget 2016” and then “Save”.
  4. At the “Start” field heading (next to “Select budget”), select the month your financial year start in, usually, this is July for most businesses.
  5. At the “Actuals” field heading, select “12 months” from the drop down. Note you could also do shorter budget.
    • An example for when you’d use the budget manager to do shorter period budgeting, is for a special project e.g. a new kitchen fit out.
  6. At the “Period” field heading, select “12 months” from the drop down. Note you could also choose a shorter period.
    • Now, you’ll see that blank fields for 12 months open up to the right of the spreadsheet and this is where you’ll be entering in your budget figures!
  7. Click on “Update” button.
  8. Now’s the fun part - enter in your budget figures. Remember those blank spaces? Yes, enter in your data there!
  9. When done, click “Save”. Press Delete or Cancel when you need to delete or cancel.
  10. Woot Woot! Your budget has now been created!

What’s need?

Throughout the period, you’ll be comparing your actual money in and money out with your budget. There are budget variance reports if you go to Report > All Reports.

Look at these reports to see how you’re going with budgeting during the period. Are you meeting income targets? If not, why? Are you spending above your budget? Then control spending.

Meeting budget figures means that your business performance is meeting what you anticipated when you created your budget.

So that reaches the end of your Intermediate Guide to Using Xero!

Well done! You’re now set to not only do your transactions but also manage and monitor your business finances like a boss!

Next: How to Do Your Instalment Activity Statements (IAS) in Xero

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