Xero: Month End Process

Introduction

When using Matters.Cloud together with Xero, completing a consistent month-end process helps ensure that financial information has been synchronised between the two systems, bank accounts have been reconciled, client account balances have been reviewed, and the completed accounting period is protected from subsequent changes.

This article provides a recommended month-end process covering:

Checking the Xero integration and exporting any outstanding records.
Reconciling office and client bank accounts in Xero.
Comparing client account balances between Matters.Cloud and Xero.
Saving key month-end reports.
Setting lock dates in Matters.Cloud and Xero.

Important: The exact month-end procedures and records that your firm is required to retain may vary depending on your jurisdiction and regulatory requirements. Firms should ensure that their internal procedures meet the requirements of their accountant, auditor and applicable legal regulator.

Before You Begin

Before closing the accounting period, ensure that:

All time entries for the month have been entered.
All invoices and credit notes relating to the period have been completed.
Client / trust account transactions have been entered.
Supplier bills and disbursements have been processed where applicable.
Bank feeds in Xero are up to date.

Matters.Cloud's Xero integration supports the movement of financial information between the two applications, including clients, invoices and credit notes, client/trust transactions, invoice payments and bills/disbursements. [support.ma...ters.cloud]

For more information, see:

Xero: Setting Up Your Integration [support.ma...ters.cloud]

Step 1: Check the Xero Integration

Within Matters.Cloud, navigate to:

Setup > Integrations > Xero

Review the integration and ensure that any outstanding information required by Xero has been processed.

In particular, check:

Export clients
Export disbursements
Export invoices
Export client account transactions

The objective is to make sure that transactions relating to the period being closed have been transferred between Matters.Cloud and Xero before the bank reconciliation is completed.

Depending on the type of record, the integration can create customers, invoices/credit notes and client/trust bank transactions in Xero, while invoice payments and bills can also flow from Xero into Matters.Cloud. [support.ma...ters.cloud]

Review any integration errors

If an item cannot be exported, investigate the issue before proceeding with the month end wherever possible.

Typical items to review include:

Missing or incorrect Xero account mappings.
Clients that have not been linked to Xero.
Bank account mappings.
Transactions containing incomplete information.
Previously exported or duplicate transactions.

This ensures that the bank reconciliation is being performed against a complete set of transactions.

Step 2: Reconcile the Office Bank Account(s) in Xero

Within Xero, complete the bank reconciliation for each office or operating bank account.

Reconcile all bank statement lines up to the final day of the month being closed.

For example, when completing the August month end, reconcile transactions up to and including 31 August.

Where transactions cannot be reconciled, investigate them and make any necessary corrections.

Matters.Cloud provides separate guidance on bank reconciliation when the two platforms are used together:

Xero: Guide To Bank Reconciliation [support.ma...ters.cloud]

Save the Bank Reconciliation Summary report

Once the reconciliation has been completed, save a copy of the Bank Reconciliation Summary report for each office bank account.

The report provides a record of any outstanding transactions at the point the month was closed.

Save the report with the firm's other month-end accounting records.

Tip: Even where there are no unreconciled transactions, retaining the report provides useful evidence that the reconciliation was completed.

If you encounter bank charges or payment-provider fees during reconciliation, Matters.Cloud recommends recording these adjustments in Xero rather than Matters.Cloud. [support.ma...ters.cloud]

See:

Xero: Handling Bank Charges During Reconciliation [support.ma...ters.cloud]

Step 3: Reconcile the Client Account(s) in Xero

If your firm operates client or trust bank accounts, complete a bank reconciliation for each client account in Xero.

Reconcile the account up to the final day of the month being closed.

As part of the reconciliation, compare the bank position in Xero against the corresponding records held within Matters.Cloud.

Matters.Cloud's client/trust accounting functionality maintains transactions and balances at both bank-account and individual matter level, allowing these records to be compared with the firm's actual bank account or accounting platform. [support.ma...ters.cloud]

Save the Unreconciled Items report

For each client account, save a copy of the Bank Reconciliation Summary report as at the end of the month.

Investigate unexpected unreconciled items or differences before closing the period.

Step 4: Save the Client Account Balances Report

Within Matters.Cloud, navigate to:

Finance > Client account > Balances

Depending on your firm's regional configuration, this may be labelled Trust > Balances.

The Balances report provides a breakdown of the funds currently held against individual matters. [support.ma...ters.cloud]

Set the report date to the final day of the month being closed and save a copy of the report.

For example:

Month end being completed: August
Report date: 31 August

Compare the total client account position shown in Matters.Cloud with the corresponding client account/control account position in Xero.

Any differences should be investigated before the month is treated as complete.

For further information on client account reporting and reconciliation, see:

Trust/Client Account Management Overview [support.ma...ters.cloud]

Step 5: Set the Time Entry Lock Date in Matters.Cloud

Once the firm's time recording for the period has been reviewed and completed, set the Time Entry Lock Date in Matters.Cloud.

The lock date should normally be set to the last day of the accounting period being closed.

For example, after closing August:

Time Entry Lock Date: 31 August

This forms part of closing the period and helps prevent transactions relating to a completed period from subsequently being altered.

Step 6: Set the Invoice Lock Date in Matters.Cloud

Within Matters.Cloud, navigate to:

Setup > Settings

Locate Invoice lock date and set it to the final day of the period being closed.

For example:

Invoice Lock Date: 31 August

The Matters.Cloud invoice lock prevents new invoice drafts from being created with an invoice date on or before the specified lock date. Existing drafts dated in the locked period must have their date moved beyond the lock date before they can be completed or emailed. [support.ma...ters.cloud]

For full details, see:

Using the Invoice Lock Date in Matters.Cloud [support.ma...ters.cloud]

Step 7: Set the Lock Date in Xero

Once the reconciliation and month-end reporting have been completed, set the corresponding lock date within Xero.

Set the lock date to the final day of the accounting period being closed.

For example:

Xero Lock Date: 31 August

Xero lock dates prevent users from adding or editing transactions dated on or before the lock date. Xero supports restricting either all users or all users except those with the administrator role, and an administrator can temporarily remove a lock date when a legitimate correction is required. [central.xero.com]

For instructions on configuring lock dates, see:

Set up or remove lock dates in Xero [central.xero.com]

Best practice: Set the Matters.Cloud and Xero lock dates to the same period-end date so that the closed accounting period is protected consistently across both applications.

Step 8: Save the Month-End Financial Reports from Xero

Once all reconciliations and adjustments have been completed, generate and save the following reports from Xero:

Balance Sheet

Run the Balance Sheet as at the final day of the month.

For example:

Balance Sheet as at 31 August

Save a copy with the firm's month-end records.

Profit and Loss

Run the Profit and Loss for the accounting period required by your firm's reporting procedures.

For example:

1 August to 31 August

or, where year-to-date reporting is required:

Start of financial year to 31 August

Save a copy with the firm's month-end records.

Recommended Month-End Checklist

Use the following checklist each month:

Matters.Cloud

Check Setup > Integrations > Xero
Export outstanding clients
Export outstanding disbursements
Export outstanding invoices
Export outstanding client account transactions
Resolve any integration errors
Review the client account balances at month end
Set the Time Entry Lock Date
Set the Invoice Lock Date

Xero

Month-End Records

The final month-end pack should therefore normally contain:

Office account Bank Reconcilation Summary report(s)
Client account Bank Reconcilation Summary report(s)
Matters.Cloud Client Account Balances report
Xero Balance Sheet
Xero Profit and Loss
Any additional reconciliation schedules or explanations required for outstanding items

Keeping these reports together provides a consistent month-end record and makes it easier to review historical accounting periods or provide information to the firm's accountant, auditor or regulator.