8. Financial Processes - Month-end closing

Insurance
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This work instruction is part of the guide Setting up your insurance solution.

Introduction

Correctly closing a financial year and month is essential for ensuring the accuracy and completeness of financial reporting. This document describes the steps that must be taken to perform both a month-end and year-end closing.

Month-end closing

Assuming that financial year periods are generated on a monthly basis (most common), it is advisable to close the previous month at the beginning of each month. Closing prevents general ledger entries from being made for the relevant accounting period.

Closing an accounting period can be done by following the next path:
All apps – Settings – Accounting periods

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Before or after the period is closed, it is advisable to perform the following checks/actions:

  • Reconciliation of sub-administration with general ledger administration.
  • Generic:
    • The GBR ‘Accounts receivable’ balance at the end of the period corresponds to the sum of outstanding sales invoices with a reference date of the 1st of the month. This can be checked via the reports Outstanding accounts receivable + Column balance
    • The GBR ‘Accounts Payable’ balance at the end of the period corresponds to the sum of outstanding purchase invoices with a reference date of the 1st of the month. This can be checked via the reports Outstanding Accounts Payable + Column Balance.
    • Bank balances of general ledger accounts for the bank account at the end of the period correspond to the closing balance of the bank statement at the end of the month.
  • Insurance:
    • The GBR balance for ‘Claims transactions payable’ at the end of the period corresponds to the sum of outstanding claims transactions on the reference date of the 1st of the month.
    • The GBR balance for ‘Claims reserves’ at the end of the period corresponds to the sum of outstanding claims reserves on the reference date of the 1st of the month.
    • Current account check;
      • Insurer/Authorised representative who sends a monthly current account overview
      • Intermediary who checks the registration in their own application based on the current account provided by the Authorised representative/Insurer.
  • Retail:
    • Balance sheet “Goods still to be delivered” corresponds to the total goods that must be delivered.
    • Balance sheet “Purchase invoices to be received” corresponds to amounts payable.
    • Balance sheet “Stock” at the end of the period corresponds to the stock list on the reference date.
  1. Depending on the components selected, it is possible that no sub-administration of a particular general ledger account is available in the application. In this case, it is necessary to make journal entries for items such as salaries or assets.
  2. Tax return: depending on the frequency of tax returns, you must submit the tax return to the tax authorities after closing the period. The report can be generated via the ‘Tax return’ module.

By opening a row you can edit and close that period

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Step-by-step plan – Year-end closing

When the last period of a financial year is closed, the financial year is automatically closed as well. The actions involved in a year-end closing are therefore virtually identical to those involved in a month-end closing and ultimately aim to produce the annual accounts. Checks that are carried out during the month-end closing must also be carried out at the end of the year.

After checking the figures, it is possible to generate an Audit File Financial for the relevant financial year via the Actions panel. Audit File Financial (XAF) is a standardised digital file used to export financial data from an accounting system. The purpose of this file is to provide financial records in a simple and uniform manner to accountants or auditors, for example.
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Once all income and expenses have been recorded and the profit or loss has been determined, the result is recorded in the own reserve. This journal entry can be generated via the financial year page:
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The entry that is generated (3) is added to the selected journal (2) in a 0 period of the following financial year. Subsequently, the result for the financial year is offset for each general ledger account and posted as a sum to the general ledger account result (1). The entry is not yet finalised. This is a manual action.