At the end of every month an accounting team will record and report certain balances and performance figures for the period. Once those details have been reported it is important that the balances in the system do not change. Controlled changes may be made at the finance teams discretion but generally there needs to be some way of preventing either deliberate or accidental changes to prior periods.
In NetSuite that safety measure is the period close process. This allows a senior member of the finance team to lock an accounting period ensuring no further transactions can be posted. This process can even be split up to, for example, only lock the Accounts Payable register. This allows the period close to be broken down to smaller sections that can be locked as and when balances are finalized.
NetSuite isn’t unique in having a period close process. All accounting systems will have a similar feature and whether using NetSuite or simply a series of Excel spreadsheets accountants the world over understand the need to keep those month end figures accurate.
Manage Accounting Periods in NetSuite
To begin the month end process in NetSuite you will first navigate to the Manage Accounting Periods page. This can be found at Setup > Accounting > Manage Accounting Periods. Unless you are using an Administrator role you will need to make sure you, or the person responsible for closing the period has the Manage Accounting Periods permission.
This page will show you a list of all the accounting periods in all financial years set up in your NetSuite instance. The financial years can be collapsed and expanded individually or using the toggles in the column headers.
Find the current period or the period you want to begin closing. Click on the icon in the Checklist column to load the month end checklist.
Bear in mind that you will not be able to begin working on a period until all prior periods are closed. You will know that particular period close has been completed because there will be a green checkmark as shown in the image above.
The checklist dictates that it is completed in a certain order. You cannot move on to the next task until you have completed the prior one. There is likely to be other actions specific to your organization that you also complete as part of month end. You might want to draw up your own checklist that incorporates these system steps alongside you own to ensure nothing is forgotten.
You may also find that some of these steps are not relevant to you and your organization. Some tasks will allow you to simply mark them as complete without completing the action. To click through to one of the required steps simply click the green arrow in the Go To Task column.
NetSuite’s Period Close Checklist
The checklist is made up of the following steps
Once all invoices for the month have been issued and all payments posted you will want to lock Accounts Receivable to ensure no further changes are made. If you are using NetSuite OneWorld you can choose to this for individual subsidiaries or the entire group.
Similar to the above step but for Accounts Payable. Before locking the period make sure all bills have been posted and any payments that have been made are logged in NetSuite.
Once the finance team are comfortable that all transactions for the period are posted and no further changes should be made you can use this step to lock the whole general ledger.
Resolve Date/Period Mismatches
This step will take you to a list of all transactions posted in the period so you can identify any date discrepancies. You cannot action anything from this page but it will provide you with the information you need to see if a transaction is showing the wrong period or perhaps the wrong date. Update any transactions you need to update and then mark the step as complete.
Review Negative Inventory
Ideally you shouldn’t be showing any negative inventory but sometimes, for example when stock is in transit, totals may be negative momentarily. This report simply allows you to identify any negative inventory so you can either fix the problem or understand why it is that way.
Review Inventory Cost Accounting
Check here that all cost accounting processes are complete before you close the period. This will ensure your inventory is being locked in at the correct value.
Review Inventory Activity
As with the negative inventory report this step simply gives you an opportunity to review the stock position and ensure there aren’t any erroneous figures that either need fixing or explaining. An unusually large quantity of a specific item, for example, might be an input error from the supply chain team. This will need to be fixed before the period is closed.
Revalue Open Foreign Currency Balances
Revalue your open foreign currency balances to the end of month rate. Currency Revaluation transactions will be posted for this so if it is not the Administrator role carrying out this process, ensure the role in use has the correct permissions.
Calculate Consolidated Exchange Rates
If you are using NetSuite OneWorld and you have subsidiaries in multiple currencies NetSuite will need to calculate the exchange rates for your consolidated reporting.
Eliminate Intercompany Transactions
The last step before closing the period is to eliminate any intercompany transactions. Business between subsidiaries will be eliminated so only true external trade is being reported.
With all the above steps completed you can then Close the period entirely.
Re-opening a period in NetSuite
There are times when the finance team may need to go back and make a controlled change to a closed period. A user with the correct permissions can, if they wish, open prior periods to make changes.
Return to the Manage Accounting Periods page and click on the checklist icon next to the relevant period. You will notice that all steps of the closed period have a lock icon over the image in the Go To Task column. All but the Close step which will be the familiar green arrow. Click on the green arrow to progress.
Before then selecting the Re-Open Period action button you will need to enter a justification for your decision. After you have populated the justification box you can select Re-Open the period. You should pay attention to the following warning –
“Reopening will mean reopening all subsequent periods (They will remain locked however). You would also have to work down the checklist to close this and any subsequent period when you decide to close them. Are you sure?”
Bear this in mind if you are looking at opening a period from a prior year for example. It might be best to perform this action out of hours or at a time you know there is little risk somebody could accidentally post a transaction in the old period.
Once the relevant changes have been made or transactions posted, go back and close the period as normal. The fact it was opened, along with the justification reason will be recorded in the system notes for audit purposes.
You might also find the following articles useful –