This content outlines the essential steps and best practices for closing a fiscal year, emphasizing the importance of accurate financial reporting and providing a practical guide using the ODU accounting software.
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Hey dear odoers, the fiscal year has
ended for Bloom and it was a pretty good
one. As the new fiscal year is starting,
we need to close the previous one.
Closing a prior year is a crucial step
in generating financial reports as it
enables the analysis of financial health
and provides investors with an accurate
picture of the company. Here are some
best practices to help you prepare for
the fiscal year's closing. Make sure all
bank accounts are fully reconciled up to
year end. And confirm that the ending
book balances match the bank statement
balances. Confirm that all customer
invoices and vendor bills have been
created and all draft entries have been
either confirmed or cancelled as needed.
Ensure the accuracy of all expenses and
validate them. Check that all received
payments have been encoded and
confirmed. Close all suspense accounts.
Ensure your loans are properly
registered for automatic amortization calculations.
calculations.
Review overdue payables and receivables
aged over 60 days and assess whether
provision for uncertain liabilities or
an allowance for doubtful accounts is
required. And finally, book all
depreciation and deferred revenue
entries. The good news is ODU
automatically rolls up the profit and
loss statement, meaning it displays the
net of our income and expense accounts
in the unallocated earnings section of
the balance sheet. So, all that's left
for us to do is allocate those earnings.
Here we are on our database. Let's go
into the accounting app and we'll go to
configuration and settings. And here
we'll search for fiscal.
And down in the fiscal period section,
the first step is to set a fiscal year
end date. In our case, it's December
31st, but you can change it to fit your
needs and your financial reports will be
updated automatically.
In our case, it's already set, but if
not, don't forget to save.
If you started your business in the
middle of the fiscal year or if your
fiscal year is longer than 12 months,
you can set one manually by enabling
fiscal years. And then you can click on
fiscal years to set specific start and
end dates.
That's all we need for the fiscal year
Now we need to allocate our unallocated
earnings. First, let's check our profit.
We'll go to our profit and loss
statement under the reporting menu and
we're in the Belgian localization now.
So, we're looking at the Belgian profit
and loss statement, but we can easily
switch to a generic version of the
profit and loss statement as well. And
if we look at it as of the end of the
previous fiscal year, we can clearly see
last year's total income, total
expenses, and our net profit of $59,153.50.
And we can find that same value if we go
to reporting to our balance sheet. And
we'll also set this to the generic
version and to the end of 2025.
And here we'll look at the profit of the
year where we'll find that same amount 59,15350.
We're going to copy that amount and go
to our accounting menu and to journal
entries to create a new entry. And we'll
name it something recognizable like year
closing 2025.
And we're going to change the date to be
the last date of the previous fiscal
year. And in our case, we'll be using
the corresponding Belgian accounts. So
make sure to use the ones that are
suitable for your fiscal localization.
For a profit in Belgium, we'll add a
line with the account 140,000 profit to
be brought forward and we'll paste that
amount that we copied in the credit
column. Then we'll add a line with the
account 693,000
profits to be carried forward and we'll
paste that amount in the debit column.
This is a pretty simple example where
we're just moving the profits into an
undistributed profits account, but this
is also where we could split the profits
into different equity accounts if we
wanted to. But for our purposes, we are
ready to post.
And we just recognize our earnings in a
balance sheet account. And if we go back
to the balance sheet,
then we can check the total amount in
our unallocated earnings and see that it
says zero because we've allocated all of
them. We can even go to the first day of
the next fiscal year
and we'll see that both the unallocated
earnings for the current year and the
retained earnings for the current year
have both returned to zero. so that we
can start with a fresh slate for this
new year. And last year's profits are
visible in the previous year's retained
earnings account right there, ready to
Now, we'll use the annual closing
feature to complete the fiscal year end
process. Here in our accounting
dashboard, we have a dedicated journal
for our tax returns where we'll find our
annual closing tax report. When we click
on the tax returns button, this view
displays a chronological list of all
pending returns. By default, we only see
those that need to be completed.
The line related to our annual closing
includes the year 2025,
the deadline date,
and the related branch if this was a multi-comp.
multi-comp.
and an action step status summary with
our two steps review and submit. And if
I hover on the right of the line, an
activities button appears here if we
want to schedule an activity to help us
The pending message here is related to
the validation checks that ODU performs
to make sure everything is in order
before submitting the annual closing.
These checks cover allocating earnings
as well as all the best practices that
we shared earlier in this video. Some of
these checks are performed automatically
like these two here, while others serve
as reminders to review essential tasks
such as the earnings allocation.
If an automatic check detects an issue,
it will be labeled as an anomaly. Let's
start with the bank reconciliation and
we'll click on it. And we can see that
these bank transactions were not reconciled.
reconciled.
Okay, got it. It looks like the
customer's payment communication wasn't
complete. So, let's correct it right
away by just setting the correct
partner, which was Leaf and Stone
Gardens. And we'll do that on both of
these transactions.
And when we did that, ODU automatically
reconciled them with the correct
invoices. So, they are good to go. We'll
use the breadcrumbs to go back to our
tax return.
And we can see that the check has been
automatically set to reviewed.
For the earnings allocation check, I'll
click on the line. And since we took the
previous year's unallocated earnings and
moved them to our undistributed profits
account, I'll just go ahead and go back
and set this to supervised.
These checks here are automatically run
by ODO, but it's also possible to add
your own checks. You simply need to
enable the developer mode and then open
the checks section under the
configuration menu.
Once all the checks are reviewed or
supervised, the annual closing can be
submitted. We'll go ahead and validate
it. And if I click on the additional
options menu here, it's always possible
to reset it to go back to our initial
stage if needed. In our case, we'll
click submit and we'll follow the
submission instructions that are related
and we can go ahead and mark it as submitted.
Finally, we want to look at our lock
dates. These can prevent any
modifications or new records that would
mess with the fiscal year calculation.
If we go to the accounting menu, we can
find lock dates. And this menu item is
only available to users with
administrator access rights for the
accounting app. And only they can add,
remove, or modify the lock dates. We
have five different lock date types
here, and they're listed so that we can
set them in order starting at the top
and moving toward the bottom. The sales
journal lock date prevents the creation
of new invoices when closing the period.
This way, any invoices posted after this
date will have an accounting date in the
next period. The purchase journal lock
date works like the sales journal lock
date, but for vendor bills. Next, the
lock tax return date ensures no journal
entries affect tax accounts before that
date. And this was automatically set
when we validated and locked our monthly
tax return. Finally, the lock everything
date prevents any journal entries from
being posted before this date, shifting
their accounting date to after the lock
date instead.
Note that these lock dates that we've
explored so far are all reversible as
users with the accounting administrator
access rights can still change this date
after it's been set. So let's say that
we remove the lock everything date. ODU
will allow us to indicate that we want
to make an exception and this exception
can be applied only to me or to everyone
and we have options for how long it
should last. We can also log a reason
for this exception.
And all of this information is
timestamped and logged in the chatter of
the company record. For now, I'll give
myself an exception so that I can finish
closing the fiscal year uninterrupted.
Be careful though because the hard lock
date here is irreversible to ensure
inalterability and to meet accounting
requirements in some countries. If it's
not required in yours, you can skip it.
But if it is, only set it when you're
absolutely sure it's the correct date
because you will not be able to make an
exception regardless of your access
rights. That's all for this video, but
be sure to check out our online
documentation on this topic for more
information on closing the fiscal year.
This has been your Pal. I'll see you in
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