Introduction

Before you run a period close process in NetSuite, it’s important to first review each step in the process in order to understand what it does and how it impacts your data. In this post, we’ll take a deeper look into each of the key tasks within the period close checklist, exploring how each task functions and what it means for your process as a whole.

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Key Tasks

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Lock AR

First up, we’re looking at Lock Accounts Receivable. This specific task in the month close process locks the accounts receivable ledger. One World customers have the ability to lock the AR Ledger by a subsidiary—but what does that actually mean?

Locking the accounts receivable ledger will prevent users from posting transactions against any GL accounts with an account type of accounts receivable—so your typical invoice transaction, credit memo, payment, journal entry—really any transaction that can impact the accounts receivable ledger—will be blocked for that specific accounting period. Let's jump into NetSuite and take a closer look.

From our home screen, let's navigate to the period close checklist: Setup > Accounting > Manage Accounting Periods. You'll notice that we have our accounting periods closed through December 2022, so we're going to go ahead and close the accounts receivable task for January 2023.

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We can see here that the task is currently open.

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Again, One World users can either close the AR ledger by individual subsidiary or go ahead and close them all at once—which is what we’ll do for this example.

At this point, unless you have very specific role permissions in the system, you will no longer be able to post transactions against the accounts receivable ledger in the January 2023 accounting period. Let's go ahead and prove that out.

What we’ll do is log into a different role—the accounts receivable clerk—just to show you how these transactions are blocked from posting to that accounting period.

Let's go ahead and attempt to create an invoice record. First, select a customer—it doesn't really matter which one. What you'll notice is that the posting period has defaulted to February 2023. When you go to the drop down list, notice that January 2023 is not available; even if you try and type it, it will only give you January 2024. That's because we have locked the AR task for the accounting period January 2023.

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A quick note: If your user’s role has a specific role permission (that permission being “override period restrictions”), they will still have the ability to post transactions against the accounts receivable ledger even when that month close task is locked. This is why we didn't perform that test in the administrator role—because the administrator role has access to all of the role permissions, so we would have still been able to post an invoice record, for example, in the January 2023 accounting period. So, please use this role permission wisely and limit it to a small subset of users because of the ability to override those period restrictions.

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Lock AP

Next up is Lock Accounts Payable. This period close checklist task operates the same way as the “lock accounts receivable” task, but in this case we lock the accounts payable ledger.

Again, NetSuite One World customers can lock the AP ledger by subsidiary, which means that it will prevent users from posting transactions against any GL account that has a type of accounts payable. So in this case, think vendor bills, vendor credits, vendor payments, journal entries, those sorts of transactions. Let's jump into NetSuite now and validate.

Below we have our January 2023 period close checklist. You'll see that accounts receivable is already closed, so let's go ahead and close AP.

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Again, we can do that by subsidiary because this is a One World account. Let’s go ahead and close for all entities and then log in as our AR clerk. It’s perhaps unrealistic, an AR cloak posting vendor transactions, but nonetheless this will still serve the purpose of proving that we are unable to post transactions to the AP ledger now that we've closed it for January 2023. Once we’re logged in, we’ll go to Financials and create a journal entry.

Now we’ll pick a subsidiary (it doesn't really matter which one). For this example, I’ll pick our US entity. Notice that we can select the accounting period January 2023 because the accounting period is still open. Let's go ahead and select our accounts payable account. The amount doesn't matter—just use a random income statement account.

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Now let's try and save this transaction in the AR clerk role that does not have the “override period restrictions” permission in place, knowing that the AP ledger is locked for January 2023.

We’ll receive an error message from NetSuite, which is correct: The GL impact of this transaction is in a closed period and cannot be changed.

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We're receiving that error message because we tried to post a transaction against the accounts payable ledger in January 2023.

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Lock All

The “lock all” task is arguably the most confusing in the period close checklist. It only serves to complete the lock AR and lock AP tasks at the same time. If AR and AP are already closed, you still need to go ahead and run the lock all process to make sure that you can complete the remaining steps to close the accounting period. A common misconception is that the lock all task actually prevents users from posting to the general ledger, which is definitely not the case. Let's jump into NetSuite and validate.

Again, we have our period close checklist, and we're going to navigate to January 2023. We can see here that both AR and AP are closed and lock all is open.

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But, we are prevented from accessing future tasks until we “Lock All”. Once we do that, we’ll notice that the next tasks in the process are now available because we have closed lock all.

If we were to open AP and AR and then close “Lock All”, you would see that AR, AP, and lock all are closed at the same time—and that's really the only benefit of the lock all period close task. Let’s move on to the remaining close tasks in the process.

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Revalue Open Foreign Currency  

This task performs a very specific function in the month close process: to revalue GL accounts that have been configured in a certain way. Specifically, there is a checkbox on each GL account that calls out whether that GL account should be revalued for foreign currency transactions. If that checkbox is checked, that GL account will be subject to the revaluation process. Let's jump into NetSuite and actually run through the process itself.

Let’s start by first clicking on the currency revaluation button.

Notice in the image below that the system defaults to our parent entity and has all of the GL accounts selected. This is the list of GL accounts that have that checkbox checked on the GL account configuration, which was mentioned above

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There are a few points to note on this screen. The first is that it’s very tempting to check the box “include children” because elsewhere in NetSuite, when you select the parent entity and check the box for “include children” and run a process, it will execute for the parent entity and its children.

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That's unfortunately not the case with this process. In fact, when you click on “include children”, all of the GL accounts disappear. In other words, NetSuite will not revalue these accounts when this checkbox is checked. What that really means is that you need to run this process for each and every subsidiary in your NetSuite environment.

Let’s give this transaction a memo that can be referenced later on when running reports. If you need to filter for a specific class, department, or location, you can do so as well. Once you click “save”, this process will create the foreign currency balance revaluation if there were any balances in that specific GL account. The status will be shown here. In our example, there are no accounts to balance here, or revalue, so we can mark this task as complete.

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What's interesting about the revalue open foreign currency balances task is that it can also be performed throughout an accounting period, and not just as part of the month close process checklist.

In fact, if you navigate to Transactions > Financial > Revalue Open Currency Balances, you will see a screen that looks very familiar. In fact, it's the same screen that we had open before. The only exception is that you can run this for the different accounting periods that are open in the system, as opposed to being focused on one specific accounting period through the month close process checklist.

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Consolidated Exchange Rates

This period close task updates the consolidated exchange rates for the accounting period that we're closing. Let's jump back into NetSuite and take a deeper look.

Below we have the period close checklist for January 2023. The next task that we need to close is to calculate the consolidated exchange rates. Let's make sure we click on the Calculate Consolidated Exchange Rates button.

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We are taken to the exchange rates table for that particular accounting period. Notice that there is no accounting period drop down in the filter section. Here you have two options. The first is to click on the “calculate” button and NetSuite will update the consolidated exchange rates for all of the currency pairings in the system. Alternatively, you can click on the “calculate” icon that will update those specific currency pairs and exchange rates that are derived from those currency exchange rate pairs.

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Something to note is that these steps can also be run outside of the month close process. To run this process at any point during the accounting period, navigate to Lists > Accounting > Consolidated Exchange Rates.

What you'll notice here is that the period filter is available because, again, you're able to run this process for any open accounting period. Although it's showing all of the accounting periods, if we just pick a random period in the past, notice that the “calculate” button is grayed out. Notice also that there are no calculator buttons next to specific currency pairs.

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The reason for that is the accounting period is closed. So you can only run this process for open and future accounting periods that are available.

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Eliminate intercompany transactions

This particular month close task creates the intercompany elimination journal entries in the system that will eliminate those intercompany transactions and balances that should not be there for consolidation purposes.

In NetSuite (below), we're back at our period close checklist for January 2023, and we can see that the next task to close is the eliminate intercompany transactions. Once you're on this screen, click on Run Intercompany Elimination.

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That will bring you to the next screen. This is where you can go ahead and select any class, department, or location that should be populated on the journal entries that the system generates. Also, feel free to add a memo, such as confirmation that this is an elimination entry for future reference when looking at your GL data. Once you're happy with the settings, click on “save”.

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Then, to the extent that you have transactions in the system that need to be eliminated, navigate to the Status tab, and NetSuite will confirm the status. In this example, our elimination has not started, so we’ll click refresh.

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It confirms there are zero lines to process because we’ve run the elimination in the past. It's now pending and very shortly it will be complete. Depending on the number of transactions and balances that you have in the system to be eliminated, this process could take a few minutes, but generally speaking, it takes a matter of seconds.

The great thing is that NetSuite will give you the percentage complete as the process is running in the background. If you want to know which journal entries the system has generated from this process, navigate to the Results tab, click “refresh”, and you will notice that these are the entries the system has created.

Let’s go back to the Status tab for a second. Notice that in the past we’ve had an elimination process that failed with a number of errors.

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Where could those errors have come from? A common reason that the elimination process can fail is around the setup of the GL accounts, specifically intercompany GL accounts that do not have access or have not been granted access to the elimination subsidiaries. That often gets overlooked.

So, if you have an intercompany account that manages transactions between Subsidiary A and Subsidiary B, you should also consider granting access to all of the elimination entities to those intercompany accounts. It keeps things simple and consistent, and it will ensure you don't run into those errors as you run the process during month end.

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Close

Once all the period close checklist tasks have been marked as complete, the period will then be eligible to be closed. All you need to do is navigate to that final task and click on “close period” to ensure that no future transactions can be posted or modified within the accounting period. This is a key control that NetSuite has in place. NetSuite administrators and users that have the override period restrictions user role permission available to them will still not be able to perform those actions in a closed period. Let’s check that out in NetSuite.

Below is our January 2023 accounting period, and we have this final task to close the period. Let's click on Close Period.

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Now this accounting period is closed, and that's confirmed by the status in the top left.

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Let's go ahead and validate that even a NetSuite administrator does not have the ability to now create transactions in this accounting period by attempting to create a journal entry. It doesn't matter which subsidiary we pick—the period field on any transaction in the system will no longer display January 2023. And in fact, as we type in “January”, the first period that is available is January 2024. This is a system control to ensure that prior period balances cannot be modified once the period has been closed.

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Navigating back to the period close checklist, you’ll notice that you do have the ability to open the accounting period again should you need to, typically in the event of an audit. But before doing so, you must provide the system a justification. If you try to open the period, it’s going to force you to include a justification first and then open the period.

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You’ll receive a warning just to let you know the consequences of opening the accounting period.

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Allow Non-GL

Let's find out how we can allow non-GL changes to an accounting period that's closed.

This is a checkbox that's available on each accounting period. When this checkbox is checked, it gives users with the specific role permission—allow non-GL changes—to modify transactions in a closed accounting period, but only modify them in a very specific way that does not change the general ledger impact for that transaction.

In other words, if you tried to change the amount for a specific transaction, that would have a direct General Ledger impact and is not allowed. If, however, you wanted to update a memo field on a transaction, that in itself will not have a General Ledger impact, and the system will allow you to make that change.  

To see how it works, let's look at an example vendor bill that was posted in the period January 2023. Notice that by the bill icon there's a lock.

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The lock is there because the accounting period is closed and “allow non-GL changes” is not available in this period.

To enable that, we navigate to our period close checklist and click on the period itself. Notice that for the period January 2023 there is this checkbox: allow non-GL changes.

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Check that box and click save. Here, we’re in the administrator role, so naturally that role permission is granted to the administrator role. As we navigate back to the vendor bill and click on refresh, you’ll notice that the edit button is now available.

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It'll give us a warning, of course, because this transaction is in a closed period. But nonetheless, we’ll add a memo field that was missing from this transaction and save the vendor bill.

We were able to save that change and the memo update was recorded. When we modify the record again and try to change the amount, notice that we receive an error from NetSuite because we're trying to modify the GL impact of the transaction. So again, this is a key control that NetSuite has in place to ensure you cannot modify the history in a closed accounting period.

Now that we've been through the process of a non-GL impacting change, you should also be aware of how you can configure NetSuite to allow non-GL changes to an accounting period consistently across all accounting periods. If you recall, we had to navigate to the accounting period to check this box (allow non-GL changes), but there is actually a system setting that will allow you to check that box on all accounting periods.

To do so, go to Setup > Accounting > Accounting Preferences. Under the General tab of the Accounting Preferences, there is a checkbox just a little further down for “allow non-GL changes to be set by default”.

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This will check that box automatically for any accounting periods created after this checkbox is checked. This checkbox was unchecked for the January 2023 accounting period because that accounting period was created before we had checked this box within the system settings.

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Summary

In this post, we looked at the key tasks within the period close checklist. Additionally, we learned which of these tasks can be performed outside of the period close process (namely, the ability to update your consolidated exchange rates and revalue open currency balances within the system). We also looked at several key role permissions that play a big part in the period close process (e.g. the ability to override period restrictions). Lastly, we highlighted how to allow non-GL changes to transactions in a period that’s completely closed.

You should now be well equipped for your next period close process, understanding on a deeper level what each of these tasks does and how they impact your NetSuite financial data.