Year ends on March 31- Due priority should be given by all stakeholders

Year-end procedure.  In India, the accounting year is April to March.  Accounting year 09-10 has ended on 31st March 2010.  Important procedure is given below to plan the ‘year ending’ in ERP.  The following procedure for ERP rollout is very important.  Due priority should be given by the stakeholders.

The procedure will vary depending on your current status as follows:

1.    ERP status is ‘go live’.  Users are online and entering transaction in real-time.  The closing stock was already entered.

2.    ERP is being implemented.  Conference Room Pilot (CRP) run is done.  You have to  decide on the cut-off date.  You may think of considering 31/03/2012 as cut-off date, or any suitable date.  The day after the cut-off date, users go online.  That is ‘Go live’, and embraces New Year 2012-2013 with more accuracy in inventory management and tighter discipline.   There are two kinds of closing balances that are required:

Accounts closing balance:  Debtor.  Creditors.  Closing balance of stock.

It is important to note that both inventory and accounts are tightly linked in ERP.

·         FAQ: “Can we enter creditor / debtor balance and closing stock, later?”  The answer is NO.

1.    Before doing anything take backup.  Copy on once writable CD; take the backup media to another location (different building).

2.    Task:  Enter closing stock for Inventory items.

3.    Count stock.  This exercise should be done very carefully.  This is important for ‘going-live’.

4.    Enter the closing stock, as on the cut-off date, from that date onwards, ERP will prepare the inventory related books, as well as accounts books, automatically.

5.    E.g. closing balance as on March 31, mid night is opening balance for April 01.
6.    Task: Enter ALL items in the item master.
It is strongly recommended that for EACH location stock balance be taken.  E.g. stores, rejection location, scrap location, WIP (work-in-process), third party (subcontractor location), etc.

7.    Task: Take location master printout (excel sheet showing all locations) from the ERP (not from Tally).  The list will also show names of subcontractor locations.

8.    Bought out items, raw material, consumables, spares, etc.  Items that are supplied by vendors (supplier).

9.    Sub-assemblies, semi-finished goods, factory made item, etc.  This may include items that are received from third party, if it is semi-finished goods. (WIP).

10.  Finished Goods, (FG or product that usually appears in the sales invoice).

11.  Task: Prepare the Item list using ERP software instant excel sheet option.  You can prepare category, sub-category wise, separate list.  Give to concerned person to take physical stock (count) and write on the excel sheet itself, put date and sign.  This is strongly recommended to avoid confusion of item code / description.

12.  Use this list (hard copy) to enter closing stock figures in ERP.

13.  From that moment onwards, every transaction must go through ERP.

14.  Depending on your judgment, estimate time required to do the physical count and the exercise to enter the data in ERP.  This will depend on number of persons allocated for the task.

15.  During the stock taking activity, there should be NO material movement.  All goods inward and sales issue has to be suspended.  For instance some companies would like to do this exercise on 1, 2 and 3 April and start the year on 4 April 08.  Some companies stop the manufacturing activity on 30 and 31 Match.

16.  You may find items that are physically present but not in the list – enter in the item master and enter closing balance.

17.  Account Closing Balance are required for the following:
• Debtor (customer),
• Creditor (vendor, service provider, and third party) balance pertaining to 11-12 balance will be carried forward automatically.
• Pass JV (cr. Note or debit note if necessary to get the correct balance).  Make sure the bank-reconciliation exercise is done well in time for ensuring correct ‘Trial Balance’ statement in ERP.

18.  In case you have already gone “Live”:
Count physical stock for each item and write on the excel sheet printout, next to ERP stock statement (book stock) figure.  Ideally, both should be same.  If not write the difference (plus or minus).  You will have to get explanation from stores-in-charge and pass SAN (stock adjustment note) to get the book stock same as physical stock.

19.  You may find item that are shown as stock in hand but there is no such item.  Check that there is no confusion in item name.  Any case one must reconcile the stock.
20.  You will have to do this exercise for each location.  Especially stock lying with the third party (if any).

21.  Print separate list for FG, WIP, Stores items, consumables, packing material, etc. from ERP software.

22.  You will need people so plan in advance, inform your team (staff), this is not one or two persons task.  More people are required depending on number of location, size of the inventory, and so on.

23.  At the time of login, into the ERP, select appropriate year (the first screen where you give log in name and password).

24.  New document number series will start from the New accounting Year – e.g. April 1, 2012.

25.   ERP System will allow you to enter 11-12 transactions even in April 2010, (for this select year 11-12).  Finally, when the audited Balance Sheet is available one can make a “closing JV (Journal Voucher).  This may be sometime in April / May 12.  Whereas the current year (11-12) transaction can be entered from 1st April itself (these will be in new document series).

26.  Cut-off date is ‘as on’ date in the Closing Balance data entry screen.

27.  In item ledger and item stock statement ‘From’ date should NOT be less than Closing Balance, date that is used for entering closing balance.

28.   User must press ‘enter’ key after entering the closing balance stock.

29.  Once closing stock is entered, user should check, and if mistake is found, then enter again; this will over-write previous figure.  Once all closing balance is checked, printed and confirmed then REMOVE access to the closing Balance menu-using user manage.  No one should enter again cl. Bal. because this is one time exercise.
30. Only after disabling, the cl. Bal. menu user should be allowed to enter inventory transactions.
31. Closing balance Rate or value:
• While entering stock closing balance, user also should enter rate.  This is required to calculate the value.
• For item that are purchased from outside – pl. enter the Weighted Average Rate (WAR) rate (weighted average rate), or last purchase Rate, if WAR rate is not available.
• For all factory made items – SFG (Semi-Finished Goods or sub-assemblies) or FG (Finished Goods)– user should enter ‘cost rate’.

For additional information study The Sarbanes–Oxley Act of 2002

The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets.

In India PWC and Satyam is recent examples of accounts manipulation.

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