Orax SDI Cloud Reference

Financial Year-end procedures

Due to the fact that a financial year ends on a specific date and the very next day a new financial year starts, you will suddenly be dropped into a new financial year where all opening balances are zero. You will be required to manually "Import" new Opening Balances for both your normal GL Asset & Liability accounts (from the previous Closing Balances) as well as your Inventory (from stocktake or spreadsheet).

Due to the real-time function of inventory levels in a business the physical Inventory uses an effective financial year that automatically switches over to ensure its always correct and current. This means that its possible to have a different financial year configured for the GL than the physical Inventory module. The physical inventory module will always use the current/effective financial period to ensure that stock levels are up to date.

It is important to understand year-end procedures that you need to perform to ensure that there is no or very little disruption to your day-to-day business during a financial year transition.


Inventory Year-end Procedures
It is best practice to plan a company-wide stocktake for the last day of the year. The stocktake ensures that correct levels are available for company financial statements and that opening balances are available for the new year the next morning. You may opt to not do a stocktake, but this is not advisable unless you know that your inventory levels are accurate. There are no other procedures to complete during the year end for physical inventory. This system will automatically switch over to the new year and ensure that all opening balances are generated based on the previous year's closing balances.

The year end stocktake should post variances to the GL so the GL closing balances for the inventory is accurate. You will also be able to use this stocktake to import opening balances in the new financial year for your GL (see below).

Should you experience issues with inventory stock levels not being accurate after year end it may be that the inventory opening balances for the new year were not automatically imported. You may also have to finalise stock takes or stock movements after the last day due to some administrative procedures. In both these cases, you can recreate the inventory opening balances manually. To manually recreate inventory opening balances, go to the Inventory tab on the Inventory module, click on "Adjustments" in the options menu (three dots) and scroll down to the bottom of the page. You will find options to recreate opening balances for your new year. The inventory year switches over automatically (as opposed to the financial year). This means that you do not have to change your financial year. After you have recreated opening balances for your inventory, you also need to recalculate the new current stock levels.

Keep in mind that year end is a great time to assess the accuracy of your inventory system levels. If you find that there are large discrepancies, you may need to address the issues causing these discrepancies (eg. procedures, losses, damages, etc). If you do not do this it may result in poor system accuracy and inefficiencies in your inventory management.


Accounting Year-end Procedures
The accounting system is build around the General Ledger. At the end of a financial year, the current balance of each balance sheet account is closed, and a new opening balance is available the next day. It is your responsibility to ensure that all GL accounts have correct closing balances by Posting all transactions to the GL for the previous financial year after close of business on the last day, or on the morning of the next day. It may be necessary to post transactions several weeks later once all bank statements and journals have been complete for the old year.

Once all closing balances for the previous year are posted correctly, switch the financial year to the next (current) year and generate opening balances based on the previous year. This is done under the "Ledgers" tab in the "Opening Balances" option. Manually import GL balances (1) and Inventory (2). You may also manually enter the opening balances for the next year, but if customer accounts and inventory accounts have opening balances it may be easier to generate them and only change that which needs adjustment. Opening balances will usually be unbalanced. This discrepancy relates to a profit or loss accounted for in the previous year and is automatically posted to the Retained Income account to ensure the Trial Balance remain balanced.


Pricing changes
Most companies apply price increases once per year. If this coincides with your financial year-end, you'll need to plan for this as well. All prices in Orax SDI are active, so you cannot import or apply increases ahead of time. You have to make the changes on the evening or morning before they are applicable.


IMPORTANT!!! Always ensure that you have the correct financial year setup when you post and generate opening balances. If you set the year incorrectly, you will overwrite the previous year's opening balances based on the one before that. This could mess up your entire Trial Balance of your previous year.