Fiscal year and period close in Skyline Nexus ERP

What a period close is and what it protects

A period close is the point at which an accounting period's figures are finalised and further postings into it are stopped. It matters because reported numbers must stay the numbers that were reported: once management accounts, a VAT return or audited statements have gone out, a posting that quietly changes the closed month breaks the link between the ledger and every document built on it.

Closing a period protects three things. It protects cut-off, so revenue and costs stay in the period they belong to. It protects filed returns, because a VAT return reconciles to a ledger that cannot move underneath it. And it protects the audit trail, because any change after the close has to be a visible entry in an open period rather than an edit to history. Our month-end close checklist covers the tasks before the close; this guide covers the close itself and the year-end, and how Skyline Nexus ERP implements each step.

Fiscal year, calendar year and the start month

A fiscal year is the twelve-month period a business reports on. Many companies use the calendar year, but others choose a year that ends after their busy season, or match a parent company's year. In Canada, the United Kingdom and much of Europe a non-calendar year end is common and entirely acceptable, provided it is applied consistently. Changing it later usually needs a short or long transitional period and, in many countries, notice to the tax authority.

In Skyline Nexus ERP the Financial year start month is set under Settings, Business Settings, on the first tab. It is used to suggest the first fiscal year when the Accounting module is installed and for date presets in the core reports. Ledger periods themselves are created in Fiscal Authority, Fiscal Periods, described next.

Creating fiscal years and periods

Fiscal Authority, Fiscal Periods is available to administrators and to users with the manage fiscal years permission. New Fiscal Year asks for the Fiscal Year Name, Start Date, End Date and Period Type, Monthly or Quarterly, and the periods are generated automatically; a year created without periods offers Generate Periods. Monthly periods suit almost every business, because they allow monthly management accounts and let you close one month while the next stays open.

Every posting, automatic or manual, looks up the fiscal period for its date. If no period exists, the posting is refused with the message No fiscal period found for the selected date. The practical rule is simple: create next year's fiscal year before the current one ends, and make it part of the year-end checklist. A sale saved on 1 January with no new year in place is kept as a document, but its journal is refused until the period exists.

Open, Soft Close and Locked

Each period has one of three statuses: Open, Soft Close and Locked. Close Period moves an open period to Soft Close; Reopen Period returns a soft-closed period to Open; Lock Period makes the close final, and a locked period cannot be reopened. The actions need the close fiscal period permission, and every status change is written to the audit log. If Auto-create Period Snapshots is switched on under Settings, Automation Settings, a snapshot of balances is taken when a period closes, which gives a fixed record of what was reported.

No posting of any kind, manual or automatic, is accepted into a soft-closed or a locked period. The difference between the two is reversibility. Use Soft Close as soon as the month's review is done, so nobody can post into it while the management accounts are prepared. Lock the period once the figures have been relied on externally: after the VAT return is filed, after the quarter is reported to a lender, or after the audit.

• Open: postings accepted
• Soft Close: postings refused; can be reopened with Reopen Period
• Locked: postings refused; cannot be reopened
• Close, reopen and lock are audit-logged and need the close fiscal period permission

Worked example: a late invoice after the close

March has been soft-closed on 5 April. On 8 April a salesperson finds a delivery made on 30 March that was never invoiced: EUR 4,000 plus VAT of 800. The invoice is correctly dated 30 March, because that is when control passed to the customer under IFRS 15. When it is saved, Skyline Nexus ERP keeps the sale as a document and, because March is closed, refuses its journal. The sale keeps its 30 March date rather than moving into April, so the revenue of 4,000 and VAT of 800 are brought into the ledger deliberately, as follows.

The finance manager has two sound choices. If March is only soft-closed and the management accounts can be reissued, reopen March, edit the sale so its journal is rebuilt and posts, and close March again. If March is locked because the VAT return is filed, leave the document where it belongs and record the omission in the current period, following your local VAT rules for correcting a prior return; keep a note of the document without a journal, and compare the POS transactions with the GL transactions in Data Verification so nothing else is missing. Either way the correction is visible, which is the point of the lock.

Journals must be finished before the year can close

Journal entries in Skyline Nexus ERP move through draft, submitted, approved and posted, and can end reversed, rejected or cancelled. When Require Approval for Journals is on, an entry at or above the Approval Threshold waits for approval before it can be posted. Those intermediate statuses matter at year end, because Close Fiscal Year is refused while any journal or voucher in the year is still in a status other than posted or cancelled.

Build this into the close timetable. In the last week of the year, list the Journal Entries pending approval and the draft entries, and either post, reject or cancel each one. An old draft that nobody remembers is the most common reason a year-end close is blocked.

Expense Vouchers follow the same lifecycle as journals, so the same sweep applies to journal, payment, receipt, contra and expense vouchers raised under Fiscal Authority, Expense Vouchers. Approval settings deserve a look at the same time: the install default requires approval for journals at or above a threshold of 10,000 in the base currency, with a second approval level at twice the threshold. If late adjustments are large, as year-end adjustments often are, make sure an approver is available in the closing week rather than discovering the queue on the day of the close.

Year-end closing entries, worked

Revenue and expense accounts are temporary: they measure one year and are emptied into equity at year end. Skyline Nexus ERP does this in Fiscal Periods with Close Year, which warns that all periods will be closed. The close posts closing entries that zero each revenue and expense account into the Income Summary Account and then transfer the result to the Retained Earnings Account, both of which must be set in Settings. The entries, the year's closed status and the locking of all its periods happen in one transaction: if the closing entries fail, nothing is closed.

Take a Canadian company with sales of CAD 480,000, other income of 5,000, cost of goods sold of 290,000 and operating expenses of 125,000. Income is 485,000, expenses 415,000, and profit 70,000. After the three entries below every income and expense account reads zero, the Income Summary Account reads zero, and retained earnings have risen by 70,000. The automatic closing entries can be turned off with Auto-create Closing Entries under Automation Settings if your accountant prefers to post them manually.

• Dr Sales 480,000 / Dr Other income 5,000 / Cr Income summary 485,000
• Dr Income summary 415,000 / Cr Cost of goods sold 290,000 / Cr Operating expenses 125,000
• Dr Income summary 70,000 / Cr Retained earnings 70,000
• Check: Income summary 485,000 - 415,000 - 70,000 = 0

Opening balances and the first period

A new ledger needs a starting position. In Skyline Nexus ERP, Fiscal Authority, Opening Balances lists accounts with GL Code, Account Name, Type, Normal, Debit and Credit, and shows Total Debits, Total Credits and the Difference before Save Balances. The set must balance or it is rejected. Customer and supplier balances are entered per contact rather than on the receivables and payables control accounts, so the sub-ledger ties to the control account. Opening balances are dated at the start of the first fiscal period.

Once the first fiscal period is locked, opening balances can no longer be changed, which is exactly the protection you want after the first audit. Enter and review them early, compare the resulting trial balance with the old system's closing trial balance line by line, and lock the first period only when they agree. Our guide on migrating to Skyline Nexus ERP works through a full cut-over trial balance.

Correcting errors in a closed period

Because a closed period accepts nothing, every correction is made in an open period. Under IAS 8, a material prior-period error found after the financial statements were authorised is corrected retrospectively in the next statements, by restating comparatives and adjusting opening retained earnings, and disclosed. Immaterial errors are simply corrected in the current period. In both cases the ledger entry is posted in an open period; the restatement is a presentation matter in the statements.

In Skyline Nexus ERP a posted journal is corrected by Reverse Journal Entry, with a Reversal Date and a reason, or by Correct Journal Entry, which reverses the original and opens a new entry pre-filled with its lines. Choose a reversal date in the current open period. Our guide on finding and correcting accounting errors explains how to classify an error before choosing the entry.

A close calendar that uses these controls

The controls work best on a fixed timetable that everyone knows. A small finance team can run the following sequence every month, with the year-end steps added in the last month.

• Working day 1: confirm next period and, in the last quarter, next fiscal year exist
• Day 1-2: clear pending approvals and drafts; run Data Verification and the Day Book Gap Analysis
• Day 2-3: bank reconciliation, VAT Analysis against the VAT Return form, AR and AP ageing against control accounts
• Day 3: post accruals, depreciation checks and corrections, then review the trial balance
• Day 4: Close Period (Soft Close) and issue management accounts
• After filing the VAT return or reporting externally: Lock Period
• Year end: resolve every unposted journal, Close Year, check retained earnings, lock