Dynamics GP General Ledger Close

During this recorded webinar, we discuss the year-end General Ledger (GL) close in Dynamics GP. Closing the GL is usually done later in the first month of the new fiscal year.

The intended audience for this video is Dynamics GP users – all product versions.

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Transcript below:

Melissa: Hello, everyone. Thank you for joining us today for our “Dynamics GP Coffee Break.” This month’s topic is “General Ledger Close.” My name is Melissa and I’m the facilitator today. So, if you have any questions during the presentation, please type them into the questions area in the control panel on the right-hand side of your screen and we’ll answer questions at the end. This session will be recorded and posted on our blog and we’ll share that with you later this week. And so, I’d like to introduce our presenter today, Don McNulty, who is a solution architect on our Dynamics GP team at Encore. So, Don, over to you.

Don: Thanks, Melissa. Okay. So, today it is about GL closing, something that we have to do once a year. And while as an organization, we do it a lot, most firms only do it once. So, what we’re gonna do is what do we have to close? So, we have to talk about what modules we’ve got, what does it do, when do we do it, and how do we do it. And then I’ve got a little brief thing on steps seen because it’s one of the common questions that we get. I’ll show a really quick demo, show you where in the system you can find these options and then I’ll answer any questions after that.

All right. So, modules. We need to close the individual modules as well. Now, this is optional, it’s not required, but a lot of firms will do these. And if you’re going to do them, this is the order that you’re supposed to do them. Microsoft suggests this order. Okay. So, inventory first. Now, all of these closes that you see here are based upon a moment in time. You wanna do this when you finish closing your inventory for the year.

What does it do? Well, we’re inside there, what it does is it updates the sold quantities. It can remove old the items, it can remove fully sold receipts, and things like that. As part of this, you will also be getting a copy of the slide deck. These are the listings of what these things do inside at Microsoft, so you can download a list and see what it does.

Receivables. Receivables and payables does exactly the same thing. It closes the year, it copies the current data as of that instance in time for fiscal and calendar years from current year to last year, and zeros out the current year. That’s all it does. It’s only on the summary page that it makes a difference. If you don’t do it, it does not…you don’t notice unless you use that particular screen. That particular screen also has the ability for you to select last year, this year, and current year so that you can recalculate even if you have not closed. And I will show that as part of the demo.

Fixed assets. You need to close your fixed assets. This is after you’ve run your depreciation, you’ve got all your assets in for the year and you’re ready to close and roll it over for the next year for the year-to-date depreciation. We do this by book. So, if you’ve got multiple books, tax books, from the minimum tax books, IFRS books, we need to close each of the books. So, we just need to make…be aware of that.

Analytical accounting. There is a procedure for it to make sure that you’re ready to close. This procedure should be done before we run the GL close because analytical accounting is closed at exactly the same time as the GL close. It’s now built into that same function. So, as you close one, it automatically closes the other. It’s not optional, it does it about when it does it. Get copies a bunch of data and you’ve gotta make sure that your analytical accounting is set such that your pieces that you want to close to retain during things like that close properly.

What it does. So, the GL close itself, what does it do? Well, what it does is it reconciles and summarizes the GL. So, it goes through and it does an actual rep by transaction to figure out what the balances are in each of the accounts. It then transfers those accounts to the retained earnings if it’s a profit loss account, if it’s a balance sheet account, it rolls it over. It zeroes out to profit loss accounts after they’ve been closed and makes sure that all of the accounts either have an opening balance of zero after profit and loss, or the balance that they closed with if they’ve balanced the sheet. And the analytical accounting is done at the same time.

When to do it. This is the most…this is probably the most often asked question, when should you do this? Since the balances are not available for the next year until you do the close, it’s very difficult to produce a January financial statement for December year-end if you haven’t closed because on your balance sheet, you’ve got zero as an opening balance. So, we want to do that as soon as we can such that we can run our next set of financial statements.

The recommendation is that ordinarily, we take…accountants tend to take somewhere between 10 and 30 days to prepare their books to present to their auditors, their accountants, whoever’s doing their statements, their final year-end statements. When it’s ready to go to them, that’s when you should close. That allows you to close it as soon as possible, but at the same time late enough that you’ve got all the entries in for all the adjustments that you yourself want to make.

As we all know, auditors always seem to find something wrong. They always seem to find some sort of an entry to make so that those entries can be done as a prior period closing. They usually are two to three months behind when you close and you can’t wait three months waiting for the auditors to finish in order to close your books again for December because you can’t produce your January or February month-end statements.

We can always adjust last year’s data. Easy to do. You just write an entry to the prior year, it automatically posts and re-closes the retained earnings if you had a P&L statement…P&L account. Indirectly, if you need to go back more than that because of a reclassification or a reevaluation of an asset moving backwards, you can open prior year.

It takes a lot more work because you have to reopen the year, which you can do in GP 2016 and above. You can reopen the year and then do an entry to that year and then re-close that year and move forward. The only limitation on that is that you can only have 366 fiscal periods open at a time. If each year is 12 months, that means that you have 10 years that you can go back.

How to do it. Okay. So, there’s a large list, and this list that you’ve got here is the same as the list that you see up top. Now, what it says is you complete the posting procedures and closing for the other module. Those are the ones that we talked about earlier. We post any final journal entries, i.e., bonuses, tax, whatever it is that you’ve got that you know of, you post those.

Number three is probably the single most important piece on this list that we need to do. We need to print out a list of all of your accounts and we need that list to be able to verify that an account is a balance sheet account when it’s supposed to be, and a profit and loss account when it’s supposed to be.

Every year we add in GL codes. The default setting on a GL code when you add it is balance sheet. So, if somebody forgets to take the total change by a revenue account or an expense account, we need to catch that before we run the year-end. If we run a year-end with a balance sheet account with a income statement account marked as a balance sheet or a balance sheet account marked as an income statement, we need to reopen that year, change it, and re-close the year. There’s no easy fix for it.

Close the last period. You can do this if you wish. That’s the closing, that’s the soft closing of your individual fiscal period. Do file maintenance, optional. We suggest that you do file maintenance at least on the financials. It takes probably four or five hours depending on how big your databases are, but it’s worth doing. That way you know that everything’s nice and clean.

We verify the settings. That is going to tell us whether or not the profit and loss is gonna go to one GL code or one GL code per segment. I can do it based on a single segment inside GP. So, I can close my books to division one, division two, division three. So, I can have three separate retained earnings accounts or I can only have the one.

And then seven, number seven, make sure you do a backup. We need this backup for two purposes. One, we wanna maintain this backup in case something goes wrong during the close so that we can recover. There is no other recovery. If it fails during the close, we need to recover from backup. Second, we wanna keep a copy of this for your government’s audit criteria. CRA says seven years from the last assessment, so you need to keep it seven or eight years. I would suggest that you put it someplace into an archive folder and maintain that folder for seven to eight years.

Number eight, print a detailed trial balance report and print the year-end financials. Eight and nine, you’ve probably already done so. They may be done out of order. That is something that you have to make sure, am I going to close the number I expect to retain earnings? That’s what we’re asking. Set up the new fiscal year. By the time you’re ready to close the year, you’ve already opened the new fiscal year. You need to open the new fiscal year to get your January 1st, 2nd, and 3rd transactions in and there’s no way you’re ready to close on December 31st.

So, as a result, what we do is we set that year up. So, that year has already been set up before, but if it hasn’t been, it needs to be set up because we need someplace to put the opening balances. Eleven is the close of an actual fiscal year. That’s where we hit the button that says close, it will close. And then it says go back and close all your fiscal periods for the new year and open up the ones that you want so that you can walk yourself down. That’s if you control your future fiscal period by keeping them closed.

Thirteen is if you’ve got budgets, you need to put your new budget in. You have to adjust your budget and write in your new budget so that your budgetary for 2023 or 2024 works properly. And then finally, after all that’s done and you’re ready to go, make another backup for security.

Steps. So, when we hit the close button, it’s gonna come up with steps at the bottom of the screen and it’s gonna go steps 1 all the way to 7. Step 1 goes through and make sure that everything is valid. So, in other words, it does basically does a reconcile. Number 2, the account balances are verified. It checks to make sure that they balance to what you expect.

Step 3, the fiscal year is verified, making sure that the posting number’s not gonna overlap and that the new posting number’s okay, and that we can close the fiscal year. Step 4. So, it goes 1, 2, 3 and it literally does it that fast, 1, then 2, then 3. Number 4, beginning balances are brought forward and retained earnings are created and distributions are moved to history.

When they move the distributions to history, it is moving every single journal entry, every single debit, every single credit from the GL 20,000 file to the GL 30,000 file. So, when it does that, it has to copy a lot of data. In some people’s cases, this can take an hour. So, be patient. One of the biggest things we get is people phone us and say, “Well, I started my year-end close 20 minutes ago and it’s still sitting here. What should I do?” Be patient. It could take an hour or two to do this depending on how big the database is.

Smaller companies, it will run through in minutes, but larger companies, I had one company that it took it an hour and 45 minutes in order to go through this process. They were doing approximately 1.7 million transactions a year. So, you got 1.7 million journal entries, two lines for each one. That’s 3.4 million lines at a minimum because you got a debit and a credit for each one. When you think about other things like multi-line journal entries, you probably have closer to 4 to 5 million records that you have to copy from one file to another.

The divisional retained earnings account is closed. If you have a division…if you’ve turned on the divisional accounting, it will do this step, otherwise, it just flashes past. The posting numbers for the next year are reset. So, it resets next year’s posting numbers, and then it removes the previous data that it no longer requires. Okay? So, that’s basically what the year-end close does.

So, in GP, so we’re gonna talk about this and kind of show you some of these steps. So, in your inventory, everything that you find on all these things, these are all routines. They’re all year-end close routines. We can click the year-end close routine and these are the things that we can do inside here. These are the things that I mentioned earlier today, discontinued items, sold lot attributes, and things like that, and we have date limited. This is how you get rid of some of your receipt processing.

If you run the purchase receipt report, you know that you get every single purchase receipt from the beginning of time. Once it’s been fully paid and fully sold, so there’s no receipt left, you no longer require that data in your journal entry so you can actually remove it. Most people will keep this for at least a year. So, they’ll backdate this here to 12/31/2022 and you can update the standard cost. If you update the standard cost, the standard cost field in GP will be set to be whatever is in the current field now.

So, AR and AP. So, I’ll do AP. So, when we go to our year-end close, you see I have a choice of fiscal, calendar, or both. Ordinarily, I would suggest that you run both. That depends if you’re running a 12/31. If you’re not running 12/31, obviously you don’t wanna close the calendar in September.

Last closing date. You’ll see that this one’s never been closed. Now, when I close this and you can print the report, I would not bother printing the report. The reports that print out of here are excessively long, they take approximately half a page for each vendor or customer. So, if you’ve got 5,000 customers or 5,000 vendors, you get 2,500 pages of printed report. It doesn’t really tell you that much on the report and you’ll end up throwing it in the trash can anyway, so my suggestion would be that you uncheck this when you run this.

Now, what does it do? So, when I go into a summary here, inquiry by summary, when I look at a vendor here, these are the different pieces inside here. So, inside here, this is all stored for you by that. When I look at my yearly here and I pick up my Ace Travel, you’ll see I have a year to date, a last year, and a lifetime to date. What this does is it takes the information that’s in this column here, copies and puts it into this column, takes whatever was in this column originally and throws it in the trash, takes this, copies it across and zeros that out. That’s what it does. That’s all it does. And it changes only the amount since last closed.

If I was to go by fiscal year here, it will automatically recalculate accordingly. So, it’ll show me what I did this year and last year anyway. Very few people use this particular one. This was a default that happened way back in the ’90s before they actually added the other two where it didn’t do a recalculation based on fiscal or calendar.

The problem with the amount since last closed is that by the time you close your AP, you’ve probably already entered transactions for 2023. So, therefore your year-to-date numbers are not actually accurate anyway. The same is true on the…and this same screen is available inside sales as well. So, that’s how you hit those two.

Fixed assets. So, under your fixed assets…oops, under routines you have a year-end. And this is where we select the different books. This one’s got an internal, which is my GL one, got a federal one, and an amount…and a minimum amount book. You have to close each one. You can close them all at once, which is what most people do, but you can close them individually if you need to.

And as I said to you before, analytical accounting is you need to go through the steps on that website in order to make sure that your analytical accounting will close correctly. So, that brings us to the year-end closing for GL. So, here’s the year-end closing for GL. There’s a couple of choices inside here. We can close the year and we can reverse a historical year.

If you need to do a journal entry prior period, in other words, not last year but the year before, so I closed my books for 2022 in 2023, and all of a sudden I go, “Oh, I gotta make an entry to 2021,” if I need to do that, I need to reopen 2022, then I can go into the 2022 year and write a prior period posting back to 2021. I have to go one before it. If I need any further, I can keep opening the periods up. And when I reverse them, it will only reverse the last year. It has to do them in order. I can’t open 2018 right now. I have to open 2021, then I have to open 2020, 2019 and then I can get to 2018.

This is the journal entry number that’s gonna start for the next year. That’s the next year that it’s gonna be, 2027. That’s the year that I’m currently in. This is the last change. This is the last closing date, was 12/31/2026 for my set for my demo data. So, I’ve got everything closed today. If I wish to reverse this, I can hit the reverse and I can hit the close.

When I hit the close, it tells me whether or not there’s a journal entry outstanding. This is telling you that somebody has done work in 2023. You probably have journal entries outstanding. They could be recurring journal entries, they could be batches of journal entries, they could be sales transactions, they could be purchasing transactions that have been posted and they’re sitting there as batches unposted to your 2023 year. So, we just have to know that they’re just asking you, are you sure that you’ve posted everything? That’s the question.

When I hit continue, it will start. And as you see, it goes 3, and then it stops, then 4, 5, 6, and then 7 is last. At the end of it, you get an analytical closing report and I’ll put that to the screen, and then I get a year-end closing report, and I’ll put that to the screen.

So, the analytical closes down your AA and it closes all of your accounts for AA. So, this is your analytical one. And then after that, you get the one that most people are looking for and it’s this one here. Now, one of the things about this is that it closes the GL based on currency. So, every account closes one record for each currency that it had at the end of the year.

So, as you can see here in the retained earnings I’ve got Australian, Canadian, New Zealand, UK, and the U.S. So, there’s my pieces inside here. These are all the different revenue accounts. Now as I move down, you’ll see these are all the revenue and expense accounts. This particular one has a few multicurrency, but most of them only have a single currency. If you’re not running multicurrency, then none of this shows up. It’s just a single line per journal entry. Okay? But if you have this, you need to take a look at it because as you can see in there.

Now, this is a very…you cannot reprint this particular report. So, we highly recommend that you save this as a PDF or physically print it and store it in your year-end file. Okay? So, once you’re done, you get to the bottom, it gives you the totals. And if you go to the very top, you can see here the retained earnings. If you were to add these up, the 263,501, that’s what you closed to retained earnings. Okay? You’ll see there’s a functional amount and an original amount. This is the net that went to retained earnings, and these are the different ones in the different currencies. Okay?

So, if I had to open one, because that’s the other thing that we talked about, let me just close this and reopen this screen here, year-end closing, you’ll see that it says 2028 now and there’s 2027. I’m gonna reverse a historical year. I’m gonna open up 2027, I’m gonna hit process.

Now, ordinarily, you would do a backup to make sure that this is okay and it’s now open. And then it says to reconcile all your years. So, you have to re-reconcile all your years once you’ve done this. You reconcile, and that reconcile is under utilities and reconcile. And if you are on a new version of GP, I believe it’s 2018 and above, you’ll have this all button, which will do them in reverse order, start at the oldest one, go all the way to the first one, and does it in one step.

If you’ve got a newer one, you need to start here and start here and do each one one by one until you get to today’s date. I’m gonna click on the all and I’m gonna go reconcile and go, yes. And it will run through and reconcile all my accounts. So, now my GL is now back open as if I had not done that year.

The journal entry that I wrote for the year-end is there and the backed-out journal entry is there as well. And they may or may not be the same based upon whether or not you’ve done a prior period reconcile. Okay? All right. So, I think that was… Oops, hit twice. It’s okay, doesn’t do any damage. There we are. And now if I go back to my summary here and I look at my cash accounts, there’s 2027. And if I drill down on any of this, all my detail is still there. And you’ll notice that it is listed as a non-fiscal year. If I go to 2026, it’s still a fiscal year. So, you can see that it’s been reopened as required.

Couple of things about year-end closes. If you’re running jet reports or you’re running any other product that runs your financial statements in Excel, Jet Reports, F9, Vivid, or anything like that, you are going to need to check with them as to whether or not you need to do anything there in order to roll the year over because as a minimum, you need to exit out of all your programs and come back into them.

From an Excel point of view, both Jet and F9 require that you exit and come back in, or else they will not see the new fiscal year being closed until such time as you do so because it looks at what’s in history and what isn’t when you first log into Excel rather than after. Management Reporter automatically looks after it, so you don’t have to do anything. And Vivid, you need to take a look at their documentation on that. Okay? Melissa, did we have any questions?

Melissa: So far, there’s no questions. But if you have any questions, enter them into that question pane there and we can take them.

Don: You know, as I said, the number one cause for problems with this is that your accounts aren’t correct. The most common question is, how come it didn’t close properly? So, we highly recommend that you run yourself a smart list and when we go into the smart list, go into financial and you click on accounts. And when you click on the accounts, the default account inside here, let’s go with column, yeah, the default account shows the posting type. So, what you wanna do is you wanna look at this posting type and you wanna sort it by account number or sort it by that and check each of these against it.

Now, if you’ve got your general ledger maintained such that anything from 1,000 to 3,999 is a balance sheet account, then you can quickly sort it this way. When you scroll down like this one is here, you’ll see that it changes from balance sheet to profit and loss. Now, as I move down here, I see nothing but profit and losses, I’m happy, I’m happy, I’m happy.

Now, two things will show up. Allocation accounts will show up as a balance sheet account. You have no choice on that. They will show up as a balance sheet account. That’s acceptable as long as they are allocation accounts, both fixed and variable. Unit accounts also show that way. They don’t show as a posting-type unit account, which shows a balance sheet. So, in that regard, you need to make sure of that.

Speaking of unit account, one thing I did not mention was that on your unit account, you need to specify whether to close it or not. So, if you’ve got a unit account that keeps track of volumes over time based on sales, then those volumes should be zeroed out and should be closed. So, do I clear the balance out and start in zero?

If I want my square footage to remain because I have so many people in each place, then you would not check this. But when you look at a unit account like number of telephones, you would not clear the balance. But if I had, you know, MFBM for instance for lumber companies saying how many board feet did I sell each month, then I would want to zero that out at the time of year-end close. Okay. I think that if there’s no further questions, I hope you got the information that you wanted from this.

Melissa: Great. I don’t see any more questions have come in. So, I just wanna say we have one upcoming “Dynamics GP Coffee Break” webinar scheduled in our series. So, I’m adding the link to it here in the chat if you’d like to register for that session. And thank you, Don, for all the information today, and thank you, everyone, for joining us today. So, have a great rest of your day.

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