Period management : Closing one year and opening a new year
While NetSuite is a date-based system, it is best practice to close accounting periods (months) and fiscal periods (years).
Q1: What is year end closing?
It is the process which prevents users from posting entries to the sub-ledgers and general ledger for the previous year, providing a final position for the financial year.
It also facilitates the transfer of net income to retained earnings (for a corporation) or to owner’s equity (for an individual proprietorship).
Q2: How does NetSuite close the fiscal year?
NetSuite uses Automatic Close – By completing the tasks in the period close checklist and subsequently closing the period, net income will be reflected in the amount of Retained Earnings on the Balance Sheet. No manual entries are required under automatic close.
What does the user need to do under Automatic Close?
The user simply needs to close the last period in the fiscal year by completing the tasks in the period close checklist before clicking Close. Without the need for manual journal entries, net income will be reflected in the amount of Retained Earnings on the Balance Sheet.
Are income and expense accounts zeroed out in Automatic Close?
Nominal accounts are not zeroed out in automatic close even though the balances are included in Retained Earnings.
Manual Close – This method involves the creation of specific journal entries to close income and expense accounts to retained earnings.
Q3: What is the difference between locking and closing the period?
Locking the period marks tasks as complete inside the period close checklist while closing the period is changing the status of a period from open to closed.
Q4: How do you prepare for year end closing?
Before year end close, you need to close all periods in the fiscal year.
A checklist of required tasks is provided to guide you through the closing process for each period. Go to Setup > Accounting > Manage G/L > Manage Accounting Periods. Click the Checklist icon for a particular period. Sequentially complete the tasks in the checklist. Tasks are listed in the order in which they should be completed. Note some tasks have interdependencies.
If you use multiple currencies, revalue open currency balances for each period before you close it.
Q5: How do you set up a new financial year?
This is a two step process, you need to first set up a new financial year, and then you set up the related tax year.
Opening a New Financial Year
Go to Setup > Accounting > Manage G/L > Manage Accounting Periods.
On the Manage Accounting Periods page, click Set Up Full Year.
In the first fiscal month field, select the month your fiscal year begins (month 1).
In the Fiscal Year End field, enter or accept the four-digit fiscal year for which you want to generate accounting periods.
For example: 2019
Select the format you want to use for your accounting periods:
Calendar Months – This sets up 12 periods, one for each calendar month in the fiscal year.
4 Weeks – This sets up 13 periods, each for every 4 weeks in the fiscal year.
In the Year in Period Name field, select the starting or ending year to include in the period name.
For example: if a fiscal year starts in 2014 and ends in 2015, selecting Ending Year of Period would include 2015 in the name of the period.
Check One-Day Year-End Adj. Period if you want to include a standalone adjustment period for last day of this fiscal year.
Setting up Tax Periods for a Full Year
Go to Setup > Accounting > Taxes > Manage Tax Periods.
Click Set Up Full Year
In the First Fiscal Month field, select the first month in your company’s fiscal year.
In the Fiscal Year End field, enter the year for which you are setting up tax periods.
In the Period Format field, select one of the following to divide the year into:
Calendar Months – twelve sub-periods.
4 Weeks – thirteen four-week long sub-periods
NetSuite has the following enhancement that you may find useful:
- Using Quick Close to Close Periods
The Quick Close preference enables you to close one or more accounting periods with a single click. This time-saving preference is useful when you have reopened one or more closed accounting periods to make a “quick” change.
With Quick Close, NetSuite marks complete all tasks in all re-opened accounting periods, eliminating the requirement to close them one-by-one. For example, to make a change in the January 2018 accounting period. I reopen the period, which reopens all of the subsequent closed periods. I make my change. With Quick Close, I can close the January 2018 period and all subsequent periods to date at the same time.
The Quick Close preference is also useful when you prefer a one-click method for closing accounting periods. For example, I am the sole proprietor of my business. I process all accounting transactions. I do not want to step through each task on the period close checklist to close my accounting periods. With Quick Close, I can close each period with a single click.
Managing Month End Close using a NetSuite Tasklist
Month end closing tasks are a fundamental component for the Finance function. NetSuite functionality provides a high level checklist for completing period close activities.
This list guides the User through locking modules like AR & AP, reviewing date / period mismatches on transactions, and eliminating inter-company transactions.
The checklist varies based on what modules or type of NetSuite account the company is operating (Eg. OneWorld, Warehouse and Distribution etc), but the list reflects the basic requirements of closing / locking a period in NetSuite.
What the close checklist does not cover is the specific steps or company policies and procedures that most Finance users perform to complete a month end. For example, “locking AP” in NetSuite is simply marking the task complete and locking the Accounts Payable subledger from further posting. What constitutes locking AP for many users is reconciling provisions and accruals, ensuring bills received are entered in the correct period, performing final payment runs, checking all credit notes have been applied etc.
The NetSuite Period Close Checklist does not require these individual review tasks to be performed in order to lock the Accounts Payable subledger, more it expects that the business has already performed these tasks and is happy to close the subledger to prevent further posting.
The purpose of this blog is to provide a solution for allocating and tracking month end close tasks in NetSuite, and to get visibility on progress of the month end for management.
This requires the following setup:
Create a custom form e.g. Month End Task Form
The fields we will create will be displayed on this task form only.
Create a custom list to reflect the period the tasks will need to be performed in.
You can use the Accounting Period List for the custom field, but the results need to be listed as a hierarchical name (e.g. FY 2019 : Q4 2019 : Feb 2019) that is not as clean as a new list.
In excel, create a new list to be used as the csv import list for the custom field.
Then create the custom list and use the CSV tool to ‘update’ the list with the excel values (e.g. Jan 2018).
Create a functional team drop down list.
The list will be for the various functional teams like Accounts Receivable, Accounts Payable, Accounting staff etc.
The process is the same as creating the accounting period custom list from the first step (above).
Once the period for the task, and the functional team performing the task have been created, add a flag on the task for ‘Month End Task’ to be used later for a saved search.
Customize the task forms to only display those fields on the Month End Task form and add the ‘Month End Task’ checkbox field by using the New Field ability from the customized form screen.
Once that is complete, you can begin to compile the excel file to import the month end tasks.
Compile the list of month end tasks in excel
The excel file requires values for Assigned To, Subject, Functional team, Period of Task, and Start & End Date.
You can copy and paste the values, while changing the period of the tasks, and the start & end dates.
These tasks will be recurring tasks and will act as the baseline for tasks to be completed within a given timeframe.
You can add unique tasks or quarterly / annual tasks in the excel file, based on requirements.
CSV Import Type will be to ‘Activities’ and Record Type is ‘Tasks’.
Mark Add on the Import Options. Expand the Advanced Options to select the Month End Task Form as the Custom Form.
Once the tasks are imported, the last step is to create a saved search to use in the task portlet.
The search will be a ‘Task’ search with the only criteria being that ‘Month End Task (Custom)’ = True.
Modify the results to show the relevant information. Add filters with the primary required filter being the ‘Period of Task’.
This filter will allow visibility on current status of month tasks or tasks that may still be open from a previous period.
Once the search is made public and saved, users can select it to show in the Task portlet on their dashboard.
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