Our partner, FloQast, has simplified 12 easy steps for the financial close process in NetSuite
For many accountants, month-end close is a dreaded time. The process can often be long-winded, stressful, and ultimately, the worst part of the job. However, thanks to new technology and ERPs like NetSuite the close is steadily getting faster.
NetSuite has a formal closing process, with steps that need to be completed before a period can be closed. However, like most things, it is not as simple as ticking a box.
FloQast has gone through each of these steps, helping you set the process in motion and close month-end faster. We have summarised this below, but before going through the steps, first go to Setup > Accounting > Manage Accounting Periods and select the period you want to close. That brings up the Period Close Checklist. You can read the full article on FloQast’s website by following the link here.
FloQast look at NetSuite’s month-end close process
Lock A/R. The first three items on this list — Lock A/R, Lock A/P, and Lock All — must be completed before any other step can be completed. Before you can lock accounts receivable, the sales and revenue numbers have to be finalized. This means all invoices must be issued and all calculations for revenue recognition must be complete.
Lock A/P. Once all vendor invoices have been submitted to accounts payable for payment, A/P can be locked. If any material invoices are received after the processing deadline, most companies will accrue those payables with a journal entry to be reversed in the next period.
Lock All. This step locks the general ledger. Before this can be done, the accounting team must record all recurring and standard journal entries. Once the GL is locked, no more entries can be recorded.
Resolve Date/Period Mismatches. NetSuite allows periods to close with discrepancies between the date and the period, but this can cause reporting headaches down the line. Make sure that any mismatches are appropriate and intended.
Review Negative Inventory. This usually indicates a process problem that must be fixed. Otherwise, cost of goods sold will be calculated as zero. Setting up a saved search to look for negative inventory items well before period end can save time at closing.
Review Inventory Cost Accounting. This ensures that all inventory costs have been picked up. This is another area where a saved search can save you time at month-end.
Review Inventory Activity. Abnormal inventory fluctuations may indicate a process issue. Saved searches can help you identify problems and resolve them before they blow up.
Create Intercompany Adjustments. At this step, expenses are allocated across consolidated companies. The finance team should evaluate whether NetSuite should automatically set up Intercompany Adjustment Journals.
Revalue Open Foreign Currency Balances. GAAP requires foreign currency balances to be revalued at the rate at the end of the period.
Calculate Consolidated Exchange Rates. If you are in a NetSuite OneWorld environment with subsidiaries with different base currencies, NetSuite maintains a list of consolidated exchange rates.
Eliminate Intercompany Transactions. On a consolidated basis, only transactions with the outside world should show up, so transactions between parents and subsidiaries must be eliminated.
Close Period. Finally, when all of the above steps have been completed, the books can be closed. Once this is done, no one can make any changes to the general ledger.
Depending on your business and internal processes, you might find completing steps in slightly different orders works better. To help with this, FloQast has created a month-end close template, which can help get you started on developing the best process for your organisation. You can download this checklist here.