While many imagine that the complexities associated with accounting stem from playing with numbers, many difficulties in the industry stem from the logic behind maneuvering different figures, and how to categorize and manage each dollar in and out. Being watchful of every alteration you make and being alert to any changes in the statements can be mentally and physically draining.
Fortunately, technology has eased accounting to a great extent, allowing you to automate a great deal of accounting processes. This eliminates the need to spend hours fetching data from different sources and ensuring that your data and figures are accurate and up to date.
This is especially important in accounting activities such as closing an accounting period and finalizing all financial activities, whether it's a month, a quarter, or a financial year.
This guide discusses everything related to closing an accounting period in NetSuite and outlines the steps to do so.
NetSuite falls under the category of software-as-a-service (SaaS) solutions that are commonly referred to as enterprise resource planning (ERP).
This software allows you to manage, automate and centralize all of your business information and processes. NetSuite automates and optimizes your accounting and financial information and ties it to other aspects of your business, including sales, services, employee management, inventory management, and more.
In accounting terms, closing the accounting period usually includes:
The accounting close process can be time-consuming, tedious, and mentally taxing, which makes it more susceptible to human error when done manually. Errors in closing an accounting period can have significant repercussions for a business, including making decisions based on incorrect financial information, incorrect reporting of profits and losses, reconciliation issues, operational delays, audits, loss of stakeholder trust, and reputational damage.
Fortunately, NetSuite's period closing functionality provides a step-by-step structured approach to closing accounting periods, thus ensuring that all the necessary steps are completed and that all the financial data for that period is recorded accurately and correctly. Only after fulfilling the necessary conditions and "locks" can you close an accounting period.
Switching the status of a particular period from “Open” to "Closed" will prevent anyone from posting to the general ledger for any dates included in this period.
Closing a period should be a final step, following the process of account reviews and reconciliation that ensures correctness and balance. To close the period for the selected accounting period, simply go to Setup > Accounting > Manage GL > Manage Accounting.
NetSuite provides a Period Close Checklist that guides users through the necessary tasks to ensure a proper and accurate period close. The checklist includes:
Lock Accounts Payable: Ensures no further AP transactions can be posted.
Lock Accounts Receivable: Prevents additional AR transactions.
Lock Payroll: If enabled, locks payroll transactions.
Lock All: Locks all modules to prevent any transaction postings.
Additional tasks in the checklist may include:
Create Intercompany Adjustments: Ensures correct intercompany balances.
Revalue Open Foreign Currency Balances: Adjusts for currency fluctuations.
Recognize Revenue: Allocates revenue to the correct periods.
Reclassify Revenue: Ensures revenue is correctly categorized.
Calculate Consolidated Exchange Rates: Updates exchange rates for consolidated reporting.
Completing these tasks ensures that all necessary adjustments are made and the period can be closed accurately.
NetSuite offers two methods for closing accounting periods: Quick Close and Manual Close.
Quick Close: This method is a time-saving option that allows for rapid closing of periods. It is useful when you need to reopen one or more closed accounting periods to make changes or corrections. Quick Close is best suited for periods with minimal activity or where the close process is straightforward.
Manual Close: This method involves completing each task in the Period Close Checklist manually, providing a detailed and thorough review of all transactions and adjustments. Manual Close is ideal for periods with complex transactions or significant activity, ensuring all entries are accurately recorded and reconciled.
Proper management of accounting periods is crucial for maintaining accurate financial records. NetSuite allows users to manage accounting periods through the following steps:
Set Up Accounting Periods: Define the start and end dates for each accounting period.
Open Periods: Ensure periods are open only when transactions need to be posted.
Close Periods: Follow the Period Close Checklist to close periods accurately.
Reopen Periods: If adjustments are needed after a period is closed, authorized users can reopen the period, make necessary changes, and then close it again.
Managing accounting periods effectively ensures that financial data is accurate and that the organization's financial reporting is reliable. Proper period management also supports compliance with accounting standards and regulatory requirements.
Accounting period closing is an inherently tough process, and manual accounting operations certainly make it more difficult and prone to error. Many companies suffer preventable process issues, but NetSuite is designed to address these challenges and help you close your books with ease. NetSuite assists with:
NetSuite comes with a plethora of business management options that allow you to streamline your accounting operations for increased operational efficiency. For example, using NetSuite's Quick Close to close periods expedites the entire closing process for businesses with straightforward financial activities and provides time-saving functionalities for businesses whose financial operations are more complex or might require revisions before closing.
NetSuite allows your accountants to make changes to previously locked transactions that could impact general journals and intercompany journals, provided that the users are granted adequate permissions. Quick Close function also requires special permissions, ensuring that only authorized personnel are able to execute this particular task.
A level of control helps maintain the accuracy and security of financial data by making it available to view and edit only by those with proper permissions. Apart from numerous safety features, such as permission management, NetSuite also offers NetSuite accounting management for multiple accounting periods. This allows your accounting team to manage multiple periods simultaneously, which is perfect if your company practices multi-book accounting. It enables your accounting team to maintain the company's books across its entire operations and eliminates the need for spending exorbitant amounts of time dealing with manual data analytics and tons of spreadsheets just to conform to various regulatory demands.
Additionally, all data that has been recorded in one accounting book can be selectively replicated in another, along with the necessary adjustments such as currencies and taxes. This ensures smooth operations and accounting consistency among different accounting teams, such as those working for companies that operate in different global areas.
The closing accounting period is a complex accounting operation that can be a mentally taxing process, but is made much simpler through NetSuite’s robust accounting and automation functionality.
If you're interested in upgrading your financial operations and resources management by automating your accounting operations and other processes across your organization, don’t hesitate to contact ScaleNorth.
