Xero Year-End Best Practices for Schools and Academy Trusts

The start of a new academic year is always a busy time for schools and trusts. While staff and pupils settle back in after the summer break, finance teams are often still working through year-end tasks, finalising reports and preparing for audit or external review.

To help make the process easier, we’ve created a Xero Year-End Best Practices Guide, alongside a video walkthrough showing many of the key steps being carried out directly within Xero.

Whether you prefer to work through a written guide at your own pace or follow along on screen, both resources are designed to help you work towards a clean, well-documented year end and start the new financial year in a controlled way.

Build a clear year-end timetable

One of the best ways to avoid unnecessary pressure is to agree your year-end timetable early.

Set clear deadlines for staff expenses, supplier invoices and reimbursements, alongside your planned soft close and final lock dates.

It is also important to make sure responsibilities are clearly assigned across areas such as bank accounts, debtors, creditors, payroll and fixed assets.

Sharing these dates with budget holders, rather than just the finance team, can also help reduce the number of late claims and invoices that appear once the year-end process is already underway.

Create your Xero management report pack

A useful starting point is to create a single custom management report pack containing the information you will need throughout year end.

This could include your:

• Balance Sheet
• Trial Balance
• Aged Receivables
• Aged Payables
• Fixed Asset reconciliation
• Account Transactions
• Bank Reconciliation Summaries

Using one report pack helps keep the process consistent and gives you a central place to return to as figures are reviewed and adjusted.

Review debtors and creditors

Run the Aged Receivables and Aged Payables reports and work through balances that are still genuinely outstanding.

Old debtor balances may need to be chased or formally written off, while supplier invoices relating to the year should be entered even if they are not yet due for payment.

It is also worth checking for unallocated credit notes, payments on account and invoices that are still sitting in draft or awaiting approval.

For multi-academy trusts, aged reports can also be grouped or filtered by school or tracking category, allowing each entity to be reviewed individually.

Reconcile your bank accounts

Every bank account should be reconciled to its statement balance as at the year-end date, including petty cash and manually maintained accounts.

Ideally, there should be no outstanding unreconciled statement lines.

Any outstanding payments or receipts should also be reviewed to establish whether they are genuinely still outstanding or whether they need to be cancelled, corrected or offset.

Keeping a record of the reconciled position can also provide useful supporting evidence during an audit.

Review prepayments, accruals and deferred income

Finance teams should also review costs and income to make sure they are being recognised in the correct financial year.

This includes:

• Prepayments for costs paid in advance that relate to a future period
• Accruals for costs relating to the current year where an invoice has not yet been received
• Deferred income for income already invoiced or received that relates to goods or services still to be delivered

These adjustments can be posted through manual journals in Xero, applying the relevant tracking categories where necessary.

Check fixed assets and depreciation

Before closing the year, reconcile your fixed asset register to the fixed asset balance shown on the balance sheet.

Make sure all additions and disposals have been processed and that the final depreciation charge has been run.

It is also worth checking your brought-forward balances carefully. Xero does not automatically move the year’s asset additions or depreciation into brought-forward codes when the financial year rolls over, so a manual journal may be required.

Reconcile VAT and payroll

The VAT control account should be reconciled to your VAT return workings before the period is locked.

Check that the latest VAT return is up to date, investigate any differences and review any items appearing in the VAT exceptions report.

Where payroll is processed through Xero Payroll or a connected payroll system, PAYE, National Insurance and pension control accounts should also be reconciled to the relevant payroll reports.

Tidy your chart of accounts and tracking categories

Year end is also a useful opportunity to tidy up your Xero organisation.

Review duplicate or unused nominal codes, make sure your tracking categories are being applied consistently and archive tracking options that are no longer required.

Where transactions have been posted against the wrong tracking category or left unassigned, Xero's Find and Recode tool can help you correct them in bulk.

Set your Xero lock dates

Once the underlying figures have been agreed, lock dates can help protect the integrity of your year-end information by preventing historic transactions from being added, amended or deleted.

Xero provides both hard and softer lock dates, so it is important to agree how these will be used and communicate them to your users in advance.

You should also consider how your lock dates interact with any procurement, expenses, payroll or other systems connected to Xero.

Prepare for audit

Once your trial balance and wider report pack are ready, Xero's published reports feature can be used to create a fixed snapshot of your figures.

This can provide a useful point of reference during the audit, even if further adjustments are subsequently agreed and posted.

Supporting schedules for your reconciliations should also be kept together, along with notes and workings supporting any significant judgemental entries.

Start the new academic year with a clean Xero setup

Once year end is complete, take some time to complete your post year-end housekeeping.

This can include updating budgets, reviewing recurring bills and invoice templates, checking user permissions, reviewing connected apps and archiving supporting documentation from the completed year.

Download the guide and watch the walkthrough

A clean year end comes down to having a consistent process, completing the key reconciliations and keeping a clear record of the final position.

Our Xero Year-End Best Practices Guide takes you through the process in more detail, while our accompanying video walkthrough allows you to see many of the steps being completed directly within Xero.

The video covers areas including the management report pack, bank reconciliation, prepayments, fixed assets, retained earnings, tracking categories and lock dates, with timestamps included throughout the guide so you can jump directly to the relevant part.

Download the Xero Year-End Best Practices Guide

Watch the Xero Year-End Best Practices video

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