The first month. Part 3: closing the month

The circle from part 2 is complete and the month's documents are in. What is left is what you do once, at the end: work out the payroll, charge depreciation, set income against expenses and forbid changes to closed dates.

Closing is not a single button. It is a sequence, and the order matters: every operation counts what is already in the books, so run too early it counts incomplete data.

Step 0. Make sure the month is fully entered

Before closing, check two things.

Is every document approved. An unapproved document makes no postings: it is on the screen, but as far as the books are concerned it does not exist. Go through the month's journals and look at the OK tick — in the invoice journals the coloured markers show it best: a row with no marker is a document nobody approved.

Is every document entered at all. A goods receipt with no vendor invoice, a shipment with no customer invoice — a common sight at the end of a month. The "Statuses" column in the order journals finds such gaps faster than any report: a grey icon where a green one belongs.

If a document reaches you later, you can still enter it after the close — but then the close has to be recalculated.

Step 1. Payroll

Payroll calculation turns contract terms into figures: who is owed what, how much tax is withheld, how much is left to pay out. The withholding percentages come from the tax rates — the entry that was in force on the calculation date, not the current one.

The posted document creates the postings: the accrual goes to the wages account, the withholdings to the tax accounts. The cash itself moves separately — through the till or the bank — and it is that payment which clears the balance on the personnel settlement account.

The order is: accrual first, payment second. A payment without an accrual hangs as an advance, and the debt to the employee stays in the books.

Step 2. Depreciation of fixed assets

Depreciation is the monthly write-down of property. One run is one charge on a given date: the amount of the step is worked out from the model on the fixed asset card, the posting goes to the accounts of the asset type, and the residual value on the card goes down.

The service skips what should not be charged: closed objects, assets not yet commissioned, those already depreciated down to their residual value, and those already charged in the model's current period (for a monthly model — this month; the card's «Depreciation date» decides). So it is safe to run: a second run in the same month charges nothing.

Step 3. Closing the period

Closing books is a document with three tick boxes, each doing its own operation, dated with the document date:

revalue currency balances — at the rate on the document date;
close income and expenses — carry the balances of the result accounts to the financial result accounts; the pairs come from account matching;
carry the profit or loss — to the retained earnings account.

The document date is the key here: it decides the rate, the balances counted, and the date of every posting created. So the close of August is dated 31 August, not the day you got round to it.

Closing only makes sense after payroll and depreciation — otherwise their costs never reach the financial result and the month has to be closed again.

Step 4. Reporting

Three reports answer three different questions:

the trial balance — what happened: turnover and balances per account. This is the accountant's working check;
the account balance — "before and after" with no turnover, the quickest look at the month;
profit and loss — the ready-made statutory form: rows, method and accounts are built in, there is nothing to configure. If you need your own structure — a management report, a comparison against budget — that is the financial report builder, which prints from your own definition.

How to tell the close worked: afterwards the income and expense accounts are cleared, and the result shows on the profit account. If income is still sitting on its own accounts, either the closing box was not ticked or account matching has no pair for that account.

Step 5. Forbid changes to closed dates

The last step, and the one most often forgotten. Locking changes answers the question "up to which date documents can no longer be edited". The reports are filed and the period is closed — set the date, and a document dated up to and including it can no longer be posted, unposted or changed in a way that rewrites its posting. The lock judges the posting, so it does not stop the users listed in «Always open for users», documents without postings (orders, quotations) or types whose postings are switched off in «Records from Subsystems».

Without this step any user can open last month's document and correct a figure. The report you have already filed will then disagree with the database, and finding out why will not be easy.

Set up once, use every month

Three things done by hand in the first month that work by themselves afterwards:

reporting periods — instead of typing "from" and "to" every time, a period is picked by its code;
account matching — the pairs used to close result accounts; filled in once and reused every month;
subsystem records — the master switch of automatic bookkeeping: which subsystems create transaction records. If a whole class of events is missing from the general ledger (all stock movements, say), the cause is most likely here rather than in the documents.

Common questions at month end

The month is closed and then a document arrives. Enter it with its real date and redo the close in the same closing document: clear the ticks (later ones before earlier ones, or all in one save) — their postings are deleted — and tick them again. The close does not recalculate by itself, and a second closing document for the same month will not accept ticks. If the period is already locked by the change-lock setting, the lock date has to be moved temporarily.

Profit does not match expectations. The first thing to check is the cost price: whether additional costs were spread and whether goods left with a zero receipt price. That is the most common reason for overstated profit.

Depreciation was charged for the wrong month. A repeated run in the same month charges nothing, but a run dated in the next month is already the next step. The extra charge is removed by the «Delete Last Depreciation» maintenance: it cancels exactly the last charge on the object.

No stock movements in the trial balance. Look at the subsystem records setting rather than at the documents: the subsystem may have its flag cleared, in which case documents post as usual but create no transaction records.

Then it becomes routine

The first month is behind you: the database is set up, the purchase-and-sale circle is done, the period is closed. From here the same steps repeat and most of them become habit. Two things are worth coming back to when there is time:

analytics: if you did not set up objects at the start, now is the moment — income and costs become visible by department and project;
automation: scheduled jobs can do on a timer what you are still doing by hand.