We all have checklists. The big guy in the red suit has the naughty-and-nice list; you may have a year-end resolution checklist or a home winterization checklist. My wife recently put an application on my phone so she can create “honey do” lists – electronically! Lucky me! Most businesses also have month-end and year-end checklists to address closing journal entries, reports that need to be run, physical inventory, 1099 and W-2 forms being processed. Do you, however, have a checklist of the steps necessary to perform these actions in the ERP (enterprise resource planning) system?
Accounting departments are familiar with the rules on who gets a 1099 and how to count inventory, but since these actions occur once a year, it is easy to forget how to process these transactions in the ERP system, especially if the person who did it last year is no longer there. Most documented standard operating procedures focus on daily functions, but year-end procedures are just as important. Let’s walk through four examples:
1. Physical count – Most ERP systems have functionality to freeze inventory for a count. That precaution ensures that any transactions that occur during the count process will not get comingled in the count function – even though you told everyone to be out of the system. The system will generate count sheets and a count entry screen, which, upon posting, will classify the entries as a physical count adjustment. These steps help you perform the count and related analysis after the count instead of you having to create your own count sheets, risking shipping and receiving transactions being posted during the count, and entering inventory adjustments as a result of the count that look like any other adjustment transaction that occurred in the year.
2. Year-end updates - Apply the year-end software updates from the ERP provider. The updates are a result of governmental changes such as updating W-2 and 1099 forms. It is also a good idea to ask your ERP vendor if there are any service pack updates that need to be applied.
3. Year-end close process – Some systems are more finicky than others in this area, but most systems have a year-end close function. Some systems have a specific order in which each sub-ledger module must be closed. What if your auditor recommends year-end adjustments? Are you properly opening the year, entering the journal entry and closing the year again in the ERP system? Did you know your ERP could do that?
4. Year-end cleanup – There are many data cleanup functions that need to occur that are discovered during year-end financial statement preparation, such as removing old GL Accounts, Vendors, Customers and Items. Often I see companies simply change the description on these data items to “Do Not Use”. I would hope you agree that this is not a full proof solution. Document the right way to handle this clean up by setting these items to “inactive” or “hold” or “blocked.”
Checklists can be very helpful, but when it comes to your ERP system, checklists supported by user procedures are better.
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