2005 END OF YEAR CLOSING TIPS - Tenant Pro 6.0

While the End of Year Close process may at first seem a daunting task, it is actually an easy step-by-step process in Tenant Pro. The instructions below outline this process.

Now is the time to begin preparing for your End of Year close. For additional information, as well as End of Year Close Tips, browse our online Knowledge Base.

As a new year approaches, one task that most businesses face is that of finalizing the accounting information for the current year while preparing records for the new year. In Tenant Pro this is accomplished by performing a year-end close. While the end of year close process may at first seem a daunting task, it is actually an easy step-by-step process in Tenant Pro. The instructions below outline this process.

1. Determine Properties to Close
Before you start the closing process on your data file(s), you should determine which properties will be closed. Tenant Pro allows you to perform an end of year closing on all properties, or just selected properties. As part of this determination process, we recommend that you verify the fiscal year start date in the Properties window (Setup>Properties>Cur Fiscal Year Began field) for each property to ensure that each one you intend to close has the correct date.

2. Enter Closing Transactions
As you prepare to close your properties, you may need to make closing journal entries to record certain types of transactions, or to adjust final balances. Some examples of closing transactions are journal entries for interest, depreciation, or amortization. All closing transactions must be dated on or before the last day of the fiscal year you are closing.

3. Print End of Year Financial Reports
Since there is no easy way to print reports for closed years, you should print any final reports that you anticipate needing, before performing the actual close process. Let your business needs dictate which reports to print. Consider the reports you normally use, and which reports may be needed to complete tax returns. Some reports you may consider printing are the detailed General Ledger, the December Balance Sheet, and the Operating Statement. We suggest that you consult your tax professional for help in determining which financial reports would be most useful to you. If after closing, you find that you need a report you originally neglected to print, you may print it from the backup copy of your data file made prior to closing. If you restore a pre-closing backup, make sure that you do not overwrite your current data file with the backup. Refer to the September/October 2004 edition of Insights for more information on backing up and restoring your data files. If you need assistance with this process, contact the Technical Support Center.

4. Verify Financial Data
After printing your reports, check them for accuracy. You should check to see that all of your end of year closing adjustments are showing, and that the financial statements appear to be logical and correct.

5. Print 1099's
Before you close the year you should print both Owner and Vendor 1099's as explained in the User Manual. Note: The IRS has specific requirements surrounding the submission of electronic/magnetic media 1099's. As most of our customers do not meet the IRS requirements, Tenant Pro does not accommodate electronic/magnetic media filing of 1099's.

Owner 1099's are based on the calendar year and will report the total of all income accounts (4000-4999) for the owner. Amounts paid to the Owner by the management company do not enter into this calculation. The purpose of 1099's is to report income, not owner contributions/draw/equity. With respect to Owner 1099's, please be aware that Tenant Pro will only print them for Owners who have a total amount of income more than $600, and a Tax ID number in the Owners window.

Tenant Pro will only print Vendor 1099's for Vendors who have payments made to them for the calendar year, (independent of the property's fiscal year), and also meet the following criteria: 1) totaling more than $600, 2) have a Tax ID number in the Vendors window, and 3) have the "Generate 1099 Forms" box checked in the Vendors window.

6. Back Up Your Data File
We cannot stress enough, the importance of making a backup copy of your data file prior to performing your end of year close. The purpose of this is to retain a historical record of the financial standing of your managed properties at a fixed point in time, namely year-end 2004. Note: Media can fail and all backups should be restored on another computer to ensure their reliability.

We suggest that you make a minimum of two backup copies of your data file(s). One copy should be made to your hard drive, the other copy to floppy disk or CD. Refer to the September/October 2004 edition of Insights for more information on backing up your data files. When you make copies of your data file(s), be sure to clearly identify the diskettes and store them in a safe place. When backing up historic information to your hard drive, put the file in a folder other than your daily operating data file, so as not to confuse the two. The hard drive copy is recommended as a convenience, because you may wish to extract detailed information from a copy of your 2004 data file. This will allow you an easy way to create reports for the year that has been closed, without having to restore your backup from floppy disk or CD. You may choose to delete the hard drive copy after a few months, when you are sure you no longer need immediate access to the prior year information. Before doing this, double-check to make sureyour permanent backup on CD or floppy disk is valid and can be restored onto another computer. We recommend that you keep your diskette or tape backup copy away from the premises, in a safe place, such as a safe deposit box. This copy may need to be saved several years as your historical year-end record. Check with your tax professional for the required time frame for keeping this data.

7. Performing the Closing Process
After all procedures to prepare for your year-end close have been completed, (steps 1-6 above), you may begin the actual closing process.

Before beginning, make sure that you are in the correct data file. You do not want to perform the end of year closing procedure on the backup copy. The end of year close must be performed on data file(s) that you will continue to use for the next year.

From the Accounting menu, choose End of Year Close.

Enter the Fiscal Year Start date of the fiscal year of the properties you will be closing, for our example 01/01/04.

If you have properties with different fiscal year start dates, you will need to follow the End of Year closing procedure for each different fiscal year.

If you want Tenant Pro to transfer the balance of the Owner Draw Account to Retained Earnings, check the "Transfer Owner Draw Account Balance to Retained Earnings" option.

The "Recalc Vendor YTD Amounts" option will reset the year to date charges and payments in the Vendors window to zero. While this is optional, it is especially useful for those companies who print vendor 1099's. This option resets the vendor year-to-date totals to zero, ensuring that when you print 1099's next year you are using totals for that one year only.

Select the properties you want to close. Remember that if you select any properties with a fiscal year start date that is different from the one entered in the "End of Year Close" box, the property will not be closed. You will need to perform separate Year-End Close procedures for those properties with different fiscal years.

Click "Close Year". Note: Depending upon the size of your data file, this procedure may only take a matter of seconds. Once the process is completed, an "OK" message will appear displaying the number of properties that were successfully closed.

You may verify that the property closed by checking the fiscal year start date of your closed properties. Open the property window for one of the properties that should have closed. The "Current Fiscal Year Began" date should now read 01/01/05 for properties that you have closed.

8. Entering Prior Year Adjustments on Your Properties after Closing
If you find a need to make adjustments after performing your year-end close, you may still do so. Important Note: The only restriction is that prior year entries made to the new 2005 data file must be made to only Asset, Liability or Owners Equity accounts. When the year was closed, all Income and Expense accounts were closed to a zero balance and transferred to Retained Earnings. In making prior year adjustments to the 2004 data file where the adjusting entries would normally use an Income or Expense account, instead use the Retained Earnings account as an offset, which will net the same effect.

Important Tip

As mentioned previously, you do not have to perform your year-end closing process on New Year's Eve. Tenant Pro allows for a total of 24 operating months - 12 months for the current fiscal year, and up to 12 additional months to enter transactions for the next year, before you are forced to close out the current year. This allows time to prepare for your end of year close, while continuing day-to-day operations.

For example, if your administrative preference for number of operating months is set to 16 months, and the fiscal year starts on 1/1/04, you have a 4/30/05 deadline to close the year. In this case, you must perform the year-end close process before entering any transactions after April 2005. In order to close 6 months after your year ends, you will need to change the operating months to 18 (12 months for the current year, plus the 6 month extension into the next year).

When you finally close the year, all transactions for month 13-24 will be carried over to the next year. The default number of operating months is 16, allowing 4 additional months before closing. If the additional 4 months are not enough to allow you to prepare for closing, go to Setup>Preferences>Administrator Preferences and increase the number of operating months. We recommend not increasing the operating months beyond 23. Once you reach the last day of month 24, you will not be able to enter any transactions beyond that day, and will be forced to close even if you are not ready.

As you can see, Tenant Pro makes your year-end closing a breeze. If you need assistance, please contact your Support Team.