Contrary to popular belief, “year-ends” do not happen on the last day of your financial year. You must wait for bank statements and last supplier bills to arrive. Then, after posting all transactions you are aware of, you send the information to your accountant and wait for the deprecation, tax planning, and other adjusting entries to be returned to you. By the time you’ve completed your year-end, it could be months later. System Five allows you to post into the previous financial year and reprint all your accounting reports for a prior period. For example, on June 15 you can reprint the Balance Sheet, Income and Expense Statement, Aged A/R, and Aged A/P reports for December 31 of the previous year. Some other accounting systems allow you to reprint the Balance Sheet and Income and Expense Report, but very few allow you to reprint an Aged Accounts Payable report for a prior period in time. Even if the bills are now paid, System Five reports on the status of each customer and supplier for previous dates you will specify.

Inventory, however, is more complicated. Print the Inventory Stock and Landed Report at the end of the last business day of your financial year after you have received all the stock and entered all the sales for the day. This is the most accurate report of the value of inventory on hand at the end of the year. Once you have printed the Inventory Stock and Landed Report, you can advance the financial year and continue selling at the point of sale.

Recommended Procedure to Complete Year-End

1. Count the Inventory
In the days and weeks before your year-end, count your inventory, and adjust the quantities. We recommend checking one sub-category per day to not create too much work on the last day of the year. If you are spot-checking your inventory regularly, adding the inventory as you receive it, and create all the invoices as you sell the goods, then you are running a perpetual inventory system. There is no reason to close your business for one or more days to count the inventory if you plan this correctly. On the last day of the year, all you need to do is print the report.

2. Add/receive the new stock that has arrived
Ensure that all the inventory that arrived are entered/received into stock.

3. Close all the Sales
This is to ensure that the sold inventory is removed from stock before the inventory report is printed.

4. Print the Inventory Valuation Reports
Print the reports that tell you how much inventory you have on hand. You can print a detailed inventory list (Stock and Landed Report) that has lists of all inventory items or just a summary by sub-category. Do not forget to print the Open Workorders/Layaways as they contain inventory that has been reserved for customers but not yet delivered to the customer.

5. Backup the Data
This is one of the most important steps. Create a backup of your data that can be restored if you have forgotten anything. If the inventory reports later look incorrect, you’ll be able to check the detail if required. Keep this backup secure.

6. Advance the Financial Year
This step sets up the next year so you can continue selling and doing business. Go to Closing Routinesand advance the financial year.

7. Keep working and do not get behind
Now that you are in a new financial year, it is most important to keep up-to-date on all your daily work such as creating new invoices and bills. Bills that are for inventory received in the previous year should be posted back into that previous year. Bills that are for inventory received in the new financial year should be posted into the new year. At the same time, you can write off bad debts, reconcile your bank, and do all the other things you need to for the end of the previous year.

8. Check the Inventory Value
Once you have received all the bills for inventory received in the previous year, print a Balance Sheet and compare the value of inventory on hand at the end of the previous year to the inventory valuation report you printed. These numbers should be the same, but in reality, they never are. Create an adjusting journal entry to change the value in the ledger, to agree with the inventory report, and post the difference to the cost of sales. If the difference in value large, you’ll need to find out why and correct the error. Technical Support may help you track down some causes.

9. Print and Check the Balance Sheet
Check is the Proof at the bottom of this report. It should be zero. Common accounting principles dictate that the Assets should equal the Liabilities plus Owner Equity. The Proof is the difference between the two; therefore, if they are equal, the Proof should be zero.

10. Print and check the Income and Expense Report
The total net profit in the year-to-date column should equal the Current Earnings on the Balance Sheet. If they are not equal, you may have added some ledger numbers since the last time you created the report. Run the report again and review it. When those two numbers agree, you can be reasonably certain the report is OK.

11. Print and Check the Aged A/R Report
The Aged A/R report shows the total amounts owed to you by each client at the end of the year. The total amount owing at the bottom should equal the value of Accounts Receivable on the Balance Sheet. If not, you’ll need to find out why and fix it. It could be the options you selected when printing the report.

12. Print and Check the Aged A/P Report
The Aged A/P report shows you the total amounts owed to each supplier and should agree with the value of Accounts Payable on the Balance Sheet.

13. Send reports to your Accountant
Send copies of the Balance Sheet, Income and Expense Report, Aged A/R and Aged A/P reports to your accountant. They may also request a copy of your inventory report, but normally they just require the total inventory value. They may also request details from some accounts, such as advertising expenses. You can print a transaction report for the accounts requested, but don’t print the list for all accounts as it is very lengthy. If the accountant wants a list of all transactions for all account numbers, you can print the report or export the report to Excel spreadsheet and save it in your local drive or save it elsewhere (external drive).

14. Final Adjustments
When your accountant is done, you will get a list of adjusting entries for depreciating some of your assets and other calculations that are important. Create a journal entry for each of these and post them to the last day of the previous financial year.

Closing of Minimum Book Month

Book Month is Windward term that describes the accounting period to which the system posts transactions. Windward System Five has separate Book Months: sales (A/R Book Month), accounts payable (A/P Book Month), and General Ledger (Ledger Book Month). The Book Months advance automatically.

The Minimum Book Month prevents users from editing posted entries (Invoices, Journal Entries, etc.) that have occurred before the minimum book month. Also, it will change the “Unposted Book Month” on all Estimates, Work Orders and Layaways so that they can be edited even if they were created before the current minimum book month.

To advance the Ledger Book Month select the following menu path: General Ledger > Closing Routines.