After the books close: late documents, re-run reports, and B/F versus C/F

Hook

Boss, has this happened: your accountant tells you "the books are closed" and you are still holding an unposted invoice from last month. Closed? What does closed mean? Can it be reopened? What happens if you push it in? Today we explain closing the books once and properly.

What a financial year end is

Start with the financial year: it is your business's scoring period, and it does not have to run January to December. Your company can run July to June, or April to March. The last day of the period is the FYE — the referee blows the whistle and this year's score is frozen. Three things happen after the freeze: the statements are produced from it, the tax is filed on it, and the audit examines it. So closing the books is not the accountant being difficult — it is that the figures already reported cannot change any more. Remember the line from the twenty-first lesson: this year's closing balance is next year's opening. Tamper with the closing and next year detonates.

What to do about a late document

So what happens to that late invoice? Remember the principle: what closes is the period, not the document. The document does not become void — it simply cannot be pushed back into a period that has been frozen. There are two treatments. Small amounts — post to the current period: "a prior-period expense identified this period", posted now with its origin noted, clean and simple. Material amounts — talk to your accountant and do it properly as a prior-year adjustment, adjusted through the current period's opening balance, leaving a clear adjustment trail. Not quietly reopening the old books and changing figures. And to clear up one thing: the twenty-second lesson said Bukku has no lock period and a transaction from twenty years ago can be amended. Being able to change it is not the same as being entitled to. The system stays open so you can look up history; for a period already filed and audited, touching it goes through the proper adjustment procedure, not a casual edit.

Can a monthly or quarterly report be re-run?

And if what you found wrong is not last year but last month or last quarter? Here you separate two kinds of report. Statutory annual statements — frozen is frozen. In-year management reports, monthly and quarterly — those are the dashboard you drive by (the first lesson), and a dashboard's job is to be accurate, not frozen. While the year is still open, last month's error can be corrected and should be; re-run the report and mark it updated, so that the half-year close and the monthly review from the thirteenth lesson are reading the truest possible figures. In one line: amendable within the year, by procedure after it.

Comparative figures: the column beside the numbers

Open an annual report and beside every figure sits last year's — the comparative figures. Their purpose is to give the numbers a reference point. Did turnover rise or fall? Which expense line suddenly doubled? Banks and auditors love that column, because a trend is more honest than a single point. So a sloppy set of books last year damages two years: last year's statements look bad, and this year they are still the comparative. Occasionally you will see "last year's comparatives have been restated" — that is what you note when the classification changed. It is doing things properly, not covering a mistake.

B/F and C/F, and to close

Finally, two abbreviations bosses meet often and confuse often. C/F, carried forward: the balances that travel out of the closing moment — the bank balance, what customers owe, stock, loans. B/F, brought forward: the opening balances that arrive on day one of the new period. Your C/F is the next period's B/F — one figure, two names. Note: only balance sheet items travel. The profit and loss resets to zero each year and starts scoring again, with the profit earned folded into retained earnings and travelling on with the balance sheet. That is why closing properly matters: what you freeze is not only one year's result, it is next year's starting line. Closed the books in a mess? A thick stack of late documents? Grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.