Year-end Closing FAQs

Applies to: [x] C&P Classic [x] C&P Pro [x] Job Tracker [x] C&P SQL [x] My C&P! See also: Vendor 1099 FAQs

Summary: Answers to frequently-asked questions about closing the accounting year in Clients & Profits. I'm ready to close the year. What do I do now? Can someone walk me through the year-end closing process? Is the year-end closing process different in old versions Clients & Profits? Is there a year-end closing procedure in Job Tracker? Do I have to close the year on the first day of the new year? I'm not ready to close the year. What happens to new work now that it's already January? We don't use Clients & Profits for accounting. Do I still need to close the year? Which reports should I print before I close the year? Can I post time cards and time sheets in the new year before closing the year? Do I have to print my 1099 reports prior to closing? How long will year-end closing procedure take? How do I know that the year was successfully closed? Then what happens? What should I do if the close year process is interrupted or does not finish properly? What actually happens when Clients & Profits closes the year? I got a message that I can't close the year. What's wrong? How do I make post-closing adjustments to the prior year? How do I know my account balances are correct after year-end closing? I need to make an adjustment to an invoice from last year, but I can't unpost it. What should I do? In old versions of C&P, I could enter beginning balance entries in period 13. Why can't I now? Q. I'm ready to close the year. What do I do now? If you're prepared, closing the accounting year in Clients & Profits is easy: just run the Close Year tool in the General Ledger and C&P does the rest. But preparing for year-end closing is a different story -- and something that Clients & Profits can't do for you. You'll find step-by-step instructions in the General Ledger chapter of your user guide. A 15-minute online tutorial explains the entire year-end closing process, including how to prepare to close the year. Q. Can someone walk me through the year-end closing process? The C&P Helpdesk can offer guidance and advice about closing the year, but can't step you through the entire year-end closing procedure -- there are simply too many calls in January and February. Instead, the online tutorial (see above) will illustrate the key concepts and steps you should do to close the year. Q. Is the year-end closing process different in old versions Clients & Profits? The user-interface is different, but the fundamental process is identical in Clients & Profits ez/4/PLUS, Clients & Profits Classic 1.x, 2.x, and Clients & Profits Pro 1.x, 2.x. See your User Guide for instructions. Q. Is there a year-end closing procedure in Job Tracker? No. Because Job Tracker doesn't have a General Ledger, there's no accounting year to close. Q. Do I have to close the year on the first day of the new year? No. Both Clients & Profits Classic 3.x and Clients & Profits Pro 3.x support two accounting years. Clients & Profits Classic gives you three months (periods 13-15) to make year-end adjusting entries before closing the year. Clients & Profits Pro lets you work up to twelve months (periods 13-24) before closing. You can close the year any time during these periods. Q. I'm not ready to close the year. What happens to new work now that it's already January? Nothing. You'll enter new A/P invoices, A/R invoices, checks, and client payments as you normally do. The only difference is that they'll affect period 13 (i.e., the first period of the new fiscal year). Before you enter new work, be sure to change the current period in Preferences to 13. Q. We don't use Clients & Profits for accounting. Do I still need to close the year? Yes. Even though you don't use it for accounting, Clients & Profits is still making journal entries and updating G/L accounts. You'll need to close the year to reset the accounting system and the YTD totals -- even if you don't pay attention to them. Q. Which reports should I print before I close the year? Be sure to print any Detailed G/L, audit trail, or journal report before closing the year. Since these reports are based on G/L journal entries, they can't be printed again once the year is closed. (A/P, A/R, and job reports aren't based on JEs so aren't affected by year-end closing.) Also, print pre-closing financial statements like the trial balance, income statement, balance sheet, etc. for your permanent record (ask your CPA if you're not sure which ones you'll need). Once the year is closed, you'll only be able to print financial statements for the new year. Q. Can I post time cards and time sheets in the new year before closing the year? Yes. Time entries don't affect the General Ledger and don't appear on financial statements. But be sure to chose the correct accounting period for the new year's work (e.g., period 13 instead of period 12). Also, you can add jobs, POs, estimates, and expenses before closing the year. Q. Do I have to print my 1099 reports prior to closing? No. The 1099 reports and forms are based on checks you've written, and not the G/L, so can be printed any time. The 1099 FAQ (i.e., frequently-asked questions) has more information. Q. How long will year-end closing procedure take? It depends on your speed of your hardware and the size of your database, so there's no way to know for sure. To be safe, it's best to run the close-year tool overnight (or even over a weekend if you have a 100mb+ database). Remember -- no one can use Clients & Profits while its closing the year. Also, be sure to disable screen savers, automatic backups, or any other process that can interrupt the year-end closing procedure. It's a good idea to run the year-end closing procedure by running Clients & Profits on the file server itself. Because no network access is involved, it runs faster and is protected from network errors. Q. How do I know that the year was successfully closed? The Close Year window shows the status of each step in the year-end closing process. As a step is completed, you'll see the date and time displayed in the Completed column. This feature lets you monitor the close-year process as it happens. Once finished, Clients & Profits beeps then displays an "OK" message. The close-year log can be printed for references from this window by clicking the Print button in the tool bar. Q. Then what happens? You're almost ready for the new year! First, though, check the names of your accounting periods in Preferences to make sure they're accurate. Then print a YTD Trial balance from Snapshots to check your beginning balances. They should match your ending balances prior to closing. Income and expense accounts should be rolled into Retained Earnings, and shouldn't have amounts in the "beginning balance" column. If everything checks out, you're ready for new work. Q. What should I do if the close year process is interrupted or does not finish properly? Restore a backup of the database then start the year-end closing procedure again. If the computer freezes or crashes during year-end closing, it make have a damaged hard disk or other hardware problem. In this case, you'll need to use a different computer to close the year (be sure to have the bad computer serviced). Q. What actually happens when Clients & Profits closes the year? -- The database is inspected for out-of-balance journal entries (the process stops if any are found). -- The database is checked for unposted journal entries through period 12. If it finds any it will stop the close year process. Then you can post or delete them and restart the close year procedure. -- The total profit or loss is calculated by adding together all the YTD amounts for the income and subtracting the YTD amounts for job costs and expense accounts. This amount will be posted to Retained Earnings. -- The account totals from the previous fiscal year are replaced with the current year's totals. The current year's totals are then cleared, making room for the new year's work -- All journal entries from the current year are purged, making room for new JEs. -- Beginning balance JEs are created for each asset, liability, and equity account that has a balance. -- Any new A/P invoice, A/R invoice, check, or client payment posted into periods 13-24 is moved into periods 1-12. -- The YTD totals for clients, vendors, and staffers are reset. -- Any G/L account that is marked as "inactive" and doesn't have a balance is deleted. -- Any pending recurring payables added for periods 13-24 are moved to periods 1-12. Q. I got a message that I can't close the year. What's wrong? If you receive a message that you can't close the year, one of two things has happened: (1) you have out of balance journal entries in the year you are trying to close (i.e. through period 12); or, (2) you have unposted journal entries in the year you are trying to close (i.e. through period 12). If this happens, use the Out of Balance Checker to find the incorrect entries, then make the appropriate adjustments. If the database has unposted JEs, you'll need to either post or delete them to close the year. Q. How do I make post-closing adjustments to the prior year? After the year is closed, adjustments to the prior year can only be made to balance sheet accounts (i.e., asset, liability, and equity accounts). Income and expense accounts from the prior year are zeroed out and rolled into retained earnings when the year is closed, so can't be adjusted. (For adjustments to income, costs, or expenses, always use Retained Earnings instead.) Post-closing adjustments are added just like regular journal entries, except you use the period labeled "Beginning Balances." Q. How do I know my account balances are correct after year-end closing? You'll need to compare trial balances. Compare the ending balances from the trial balance printed before the year was closed to a trial balance from period 1. The ending balances on period 12's trial balance should equal the beginning balances are period 1's trial balance. (If not, an error occurred during the year-end closing procedure that will have to be run again or adjusted.) Also, all income, job costs, expense, misc income and misc expense accounts should have no balances. Q. I need to make an adjustment to an invoice from last year, but I can't unpost it. What should I do? You should not unpost work from the prior year. Add an adjusting invoice in the new year instead. Q. In old versions of C&P, I could enter beginning balance entries in period 13. Why can't I now? Because Clients & Profits now handles more accounting periods in two fiscal years, period 13 now contains entries for the first period of the new year. Since you don't have to close the year immediately, you shouldn't close it until you've entered all of the previous year's work -- eliminating the need to enter beginning balance entries into period 13. Once the year is closed, any post-closing adjustments are entered into period 1. Year-end closing tips: Be sure to make a permanent backup of the database BEFORE closing the year. Year-end closing is irreversible and can't be canceled once it starts. All A/R, A/R, checks, and client payments should be posted prior to closing the year. No one can use Clients & Profits while its closing the year (which may take several hours). Search the Daily Q&A database