Closing the Books is like closing the door – You’re saying I’m finished in that room and have moved on.
As trusted advisors to our clients, with at least some level of responsibility for 'the financials' we all have a duty to 'Close their Books, yet at the same time stay totally aware of any changes our client(s) make after the closing date.
Why close the books?
An obvious reason to close the books is, "It’s TAX time Don’t Change the Books!"
But what about the rest of the time; after financial statements, after reconciliation or after the internal review has taken place and there are no predicted changes? What if the client never sees the books and the data is only viewed inside the accounting/bookkeeping firm? Are you closing the books? How would you know if the client has made changes? Well, you really need to track these changes and know their implications.
If we treat closing the books as a check-point in the work process it makes us mindful to finish the review. As accountants we are often in a state of “work in progress” but if we stop and place a check-mark to the completed work, then we should also place the check-mark in QuickBooks Online, and this means closing the books.
Step 1 - From the Accountant Tool Box select Close Books
Close Books from Accountant Tools
QuickBooks Online will display the following window which also appears in the Company Settings Advanced window.
QBO Close the Books UI
Step 2 - Check the "Close the books" check-box, and set the "Closing Date".
Step 3 - From the drop-down field below the closing date, select the actions you want QuickBooks to follow when someone attempts to modify a transaction impacting the 'closed period'.
- "Allow changes after viewing a warning", or
- "Allow changes after viewing a warning and entering password".
Step 4 - Set and Confirm a 'closing period' Password (it's your option):
It is not necessary to set a password, but doing so forces your client(s) to stop and think about the fact that they are indeed attempting to change or add an entry after the books have been closed. While the warning message option alone is like you saying “are you sure you want to do this,” out client(s) may simply ignore the the warning as they do with so many other QBO notifications.
Password Prompt for Closed Transaction
Forcing the client to enter a password is yet another 'safety precaution.' As a firm you may decide which clients to share this password with and which clients you ask to call you when they get this message so a conversation can be had about what is being changed and the consequences.
Close Books Editorial Note 1
Tracking Changes to Closed Periods
So what does it look like when your client makes a change to their closed books?
Finding Transactions Posted in Closed Periods
Well, from the QBO-Accountant client screen you can see if the books are closed and what changes have been made in the client's QBO file after the closing date.
As I am writing this article I am also thinking (note to self) “do this in my own practice”, since this is an area where I need improvement.
Being mindful to finish the books, even if your client doesn't see them, represents an end point; closing the books is a mind set, and represents the end of the chapter.