First published Nov. 16, 2015. Updated Nov. 11, 2016
Tips for improving your internal year-end procedures
As the current year winds down, it is a good time to look ahead. We are always trying to help our family office software and accounting users increase their efficiency, so here are some tips for improving your internal year-end procedures for closing out the books and creating a new year in Financial Navigator 9.5. Please note the order of the following steps is simply a suggestion and could vary for some users.
- Enter Adjusting Entries
- Test and Correct Files
- Limit Access with Closed Period
- Create a Backup
- Begin a New Year
- Re-Update Starting Balances
Step 1: Reconciliation
Verify all your bank, broker and credit card accounts as of December 31st, or as of the end of your Fiscal Year, by ensuring all transactions are entered and then reconciling Financial Navigator’s records to the statement from the bank or custodian.
Of course, many users may need to begin the new year before completing their reconciliations for all the accounts, but there should at least be a priority on reconciling those accounts with the most outstanding transactions, like checking accounts. This will allow you to identify the outstanding items and transfer them to the new year, where you can track them as they clear.
Step 2: Enter Adjusting Entries
Enter adjusting entries as of the end of the year. These transactions include accrued items, bond amortization adjustments, depreciation, etc. Other adjustments, such as tax and K1 income adjustments, may be entered either in: (a) the new year, as the information is received; or (b) the prior year, and you can carry forward the revised ending balances by using our Update Starting Balances feature. Please refer to Step 7 of this article to find more information on how to change prior years.
Step 3: Test and Correct Files
Run the utility “Test and Correct Files” to correct any corrupted data before creating a new year. This utility can easily be found in the drop-down menu under “Utilities” from the main Financial Navigator menu.
The Test and Correct Files utility re-computes the account balances for the current year by summarizing all the transactions. Any errors caused by unsupported changes to account balances will be eliminated when this utility is run. It is also a good idea to run this test periodically throughout the year. Of course, you should always create a backup file of the entity’s data before you run this utility.
For instructions on how to run Test and Correct Files, please see Testing and Correcting Files in our online Customer Support Center.
Step 4: Limit Access with Closed Period
Utilize our “Closed Period” feature to lock the year and prevent any further changes. This function will disable the transactions grid, so no further entries or changes can be made to the closed year. However, the user will still be able to see all transactions for that year.
This function can be found in the drop-down menu under “Transactions” from Financial Navigator’s main menu.
For instructions on how to set Closed Periods, please refer to Setting Closed Periods in FNI’s online Customer Support Center.
Step 5: Create a Backup
Create a backup file for each entity by using the “Back Up” function and then store them in a safe place, preferably off-site. Backing up your entities at the end of each year, and periodically throughout the year, will protect you from losing data in case something unexpected happens to your network or computer.
The Back Up function is located in the drop-down menu under “File” from the Financial Navigator main menu.
For instructions on how to create a backup file, please read Backing Up Entity Data in our online Customer Support Center.
Step 6: Begin the New Year
Create the new year by using the “Begin a New Year” function to transfer your information from the current year to the new year. You do not have to worry about making closing entries since our system automatically performs this tedious process. In Financial Navigator, creating a new year includes, but is not limited, to the following:
- Transferring balances of asset and liability accounts
- Zeroing out income and expense accounts
- Adding the old year’s net income to either a cumulative or a separate net income equity line item
- Transferring last year’s budget or actual amounts to serve as a budget for the new year
- Transferring outstanding transactions
The system also performs many other actions automatically when creating a new year. For a complete list, please see Beginning a New Year in our online Customer Support Center.
This function can be found in the drop-down menu under “Utilities” from Financial Navigator’s main menu.
Step 7: Re-Update Starting Balances
Because users often need to make monthly payments in the new year or to just continue with their day-to-day work, it is common to create a new year in Financial Navigator before all the above steps have been completed for the old year. In such a case, when all the above steps are finally completed, the old year’s ending balances may have changed from what they were when the new year was initially created.
The utility function “Update Starting Balances and Update Asset & Liability Info” will enable you to update the starting balances for the new year to the proper amounts if the prior year’s ending balances have changed. This function is located in the drop-down menu under “Utilities” from the main Financial Navigator menu.
For instructions on how to use this function, please refer to Updating Starting Balances in our online Customer Support Center.
We hope the above tips help you to avoid problems and achieve a smooth transition when closing out the current year and starting a new one in 2016.