Xero annual report: how to run year-end accounts and financial statements

Short answer: for a small business, the “annual report” from Xero is the annual accounts: a Profit and Loss for the financial year and a Balance Sheet at the last day of the year, each with last year alongside for comparison. A Statement of Cash Flows and a Trial Balance are often added. You can run all of them yourself from Xero’s reports in a few minutes. What makes them worth trusting is the checking first: bank accounts reconciled to the statement on the last day, customers and suppliers owed matching the aged reports, loans matching the lender, depreciation and stock posted, and the tax accounts agreeing to your last return. The formal statements that go to Companies House, the IRD or the tax office (with notes and a directors’ declaration) are usually prepared by your accountant from the same Xero file.

What goes in the annual accounts

Report	What it shows	Where it comes from in Xero
Profit and Loss	Sales, costs and profit for the whole financial year	Profit and Loss report, date range set to the financial year, compared with the previous year
Balance Sheet	What the business owns and owes on the last day of the year	Balance Sheet report at the year-end date, compared with the same date last year
Statement of Cash Flows	Where the cash came from and went over the year	Statement of Cash Flows report for the financial year
Trial Balance	Every account’s balance, debits equal to credits	Trial Balance report at the year-end date
Notes and declaration	Accounting policies, loans, directors’ statement	Written by the business or its accountant, not a Xero report

Listed companies publish long annual reports with a chair’s letter and governance sections. A small business does not need any of that. Most owners searching for a Xero annual report need the first two lines of the table, for the bank, a lender, a buyer, a grant, a visa or residency application, or simply to see how the year went.

Running the reports in Xero

1. Check the financial year end in your organisation’s financial settings. Everything below depends on it, and Xero uses it to roll the year’s profit into retained earnings.
2. Profit and Loss: open the report, set the dates to the first and last day of the financial year (for example 1 July 2025 to 30 June 2026, or 1 April to 31 March), and compare with one previous year. Choose accrual basis unless your accountant prepares cash-basis accounts; the cash vs accrual guide explains the difference.
3. Balance Sheet: set the date to the last day of the year and compare with the same date a year earlier.
4. Statement of Cash Flows and Trial Balance: run both for the same year. The Xero trial balance guide shows how to check each balance on it against the bank, the tax office and the lender.
5. Put them in one document. The Management Report (or a custom report pack) groups reports with a cover and text, and can be exported as one PDF. The cover page and notes guide shows what you can add and what Xero cannot do yet. For the same pack every month rather than once a year, see the monthly management pack guide.

Xero changes report menus and names from time to time, so labels in your file may differ slightly by edition and region.

Year-end checks before you rely on the figures

The reports are only as good as the year’s bookkeeping. These checks catch most of what is wrong in a small business file. Each one compares a figure in Xero with something outside it (the Xero year end checklist has the full process in order, with the adjustments, payroll year end and the handover to your accountant):

Check	Xero figure	Compare with
Every bank account reconciled to the last day of the year	Bank balance on the Balance Sheet	The bank statement balance on that date (if they differ)
Customers who owe you	Accounts Receivable on the Balance Sheet	Aged Receivables total at the same date (aged reports)
Suppliers you owe	Accounts Payable on the Balance Sheet	Aged Payables total, plus any bills that arrived after year end for goods or work received before it
Loans and finance	Loan accounts	The lender’s statement at year end; split each repayment into interest (expense) and principal (reduces the loan)
Equipment and vehicles	Fixed asset accounts	The fixed asset register; run depreciation to the year-end date
Stock	Inventory account	A stock count on the last day, posted as a journal if you do not track stock in Xero
GST or VAT	The GST or VAT account	Your last return for the year, allowing for the final period not yet paid
Wages, super or pension	Payroll liability accounts	What was paid after year end for the last pay run of the year
Drafts and suspense	Draft invoices and bills, any suspense account	Nothing left in draft for the year; suspense at zero

A worked example

A landscaping company in Brisbane with a financial year ending 30 June. After the checks above (bank reconciled to the statement balance of 31,240 on 30 June, receivables of 42,300 matching the aged report, the van loan of 27,400 matching the lender’s statement, depreciation run to 30 June), its Profit and Loss reads:

	Year to 30 June 2026	Year to 30 June 2025	Change
Sales	540,000	498,000	+8.4%
Cost of sales	286,000	259,000	+10.4%
Gross profit	254,000	239,000	+6.3%
Gross margin	47.0%	48.0%	−1.0 pt
Overheads	176,000	168,000	+4.8%
Net profit before tax	78,000	71,000	+9.9%

Read across, not down. Sales grew 8.4% but cost of sales grew faster (10.4%), so each dollar of sales kept a cent less as gross profit. On 540,000 of sales, one point of margin is 5,400 a year, which is the question to take into next year’s pricing. Overheads grew more slowly than sales, which is why profit before tax still rose 9.9%. The gross profit margin guide shows how to find which jobs or products moved the margin.

The Balance Sheet then has to tie up with the year. Company tax at 25% on 78,000 is 19,500, leaving 58,500 after tax. The company paid 45,000 of dividends in the year. So:

Opening retained earnings 92,000 + profit after tax 58,500 − dividends 45,000 = closing retained earnings 105,500.

If the equity section of the Balance Sheet at 30 June does not add up to that, something is missing: usually the tax entry or the dividends journal, which accountants often post at year end. In Xero, this year’s profit sits in Current Year Earnings until the year closes, and then moves into Retained Earnings on its own, without a closing journal. The retained earnings guide walks through those lines. To run the after-tax and after-dividends sum on your own figures, the net profit calculator does it in one step.

Lock the year when it is final

Once the accounts are final (and, if you have one, your accountant has posted their year-end adjustments), set a lock date at the year end in Xero’s financial settings. A lock date stops anyone changing transactions on or before it, so the figures you sent to the bank or the tax office stay the figures in Xero. Without one, a payment reconciled to the wrong month next year can quietly change last year’s profit.

Who prepares the formal version

What you need to file depends on the country and the type of business:

• UK: every limited company files annual accounts with Companies House (for a private company, within 9 months of the year end) and sends accounts to HMRC with its Corporation Tax return. Small and micro companies can file simpler accounts. Sole traders do not file accounts, but their Self Assessment figures come from the same Profit and Loss.
• Australia: most small proprietary companies do not have to prepare or lodge financial reports with ASIC, but the tax return is built from the year’s Profit and Loss and Balance Sheet, and banks usually ask for both.
• New Zealand: most small companies must prepare financial statements to the IRD’s minimum requirements for their tax return, even when they do not have to file them anywhere.

Accountants usually prepare the formal statements, with notes and a directors’ declaration, using Xero’s partner report templates or their own software. Your part is a clean, reconciled file; the checks above are what most accountants ask about first.

Common questions

Can Xero produce an annual report? Yes, for a small business. Run the Profit and Loss for the financial year and the Balance Sheet at the year-end date, each compared with the previous year, and add a Statement of Cash Flows if you want one. The Management Report can group them into one PDF with a cover. Formal statutory accounts with notes are usually prepared by an accountant.

What are annual accounts in Xero? The same reports run for a whole financial year: a Profit and Loss for the year, a Balance Sheet at the last day of the year, and often a Statement of Cash Flows and Trial Balance, with last year’s figures alongside for comparison.

Do I need to close the year in Xero? No closing journal is needed. Xero moves the year’s profit from Current Year Earnings into Retained Earnings at the start of the new financial year on its own. What you should do is reconcile everything to the year end, post the year-end adjustments, and then set a lock date.

Why does my Balance Sheet not match my accountant’s accounts? Usually because the accountant posted year-end adjustments, such as depreciation, tax, dividends or a stock count, outside Xero or after you ran your reports. Ask for their adjusting journals and enter them in Xero, so next year starts from the same opening balances.

What year-end date should I use? Your business’s financial year end, set in Xero’s financial settings. It is often 30 June in Australia and 31 March in New Zealand. In the UK a company uses its accounting reference date, and many sole traders use 31 March or 5 April.

What should a small business annual report include? At minimum the Profit and Loss and Balance Sheet, both with last year’s figures, a short page saying what changed and why (sales, margin, the biggest costs, cash and loans), and any notes a reader needs, such as a large one-off cost or a new loan.

Know how the year is going before it ends

Year-end accounts tell you how the year went, months after it finished. ReportPilot reads your Xero figures and sends a short plain-English email every Monday: cash in the bank and how it has moved since last month end, how sales and net profit compare with last month, who owes you and how much is overdue, and bills due soon. Its dashboard shows 24 months of sales, profit, cash and money owed to you by month, so the year-end numbers hold no surprises. It asks Xero for read-only access, so it can read your accounts but never change them, and there is a 14-day free trial with no card.