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Closing fiscal year to retained earnings

Natalie Smith

We had our Audit Committee meeting last week, and I logged in this morning to begin the process to close the fiscal year in order to have the balance in Retained Earnings (01-3000 and 02-3000) in all 4 our databases accurately reflect the year-end balance in the General Ledger>Account and also on the trial balance report. To my shock the functionality has disappeared from my database view, and I couldn't find a solution in Knowledgebase or anywhere else. A chat with Blackbaud support showed that there is no intention of adding this functionality to web view.

I'm absolutely shocked and dismayed at this. This is a core accounting function; closing the income statement to retained earnings each year. The Blackbaud system does not allow for closing each month (which I don't love) and now you can't even close the year. I have been so worried since implementation that the accounting expertise is just not present at Blackbaud and this current situation makes me beyond nervous. How can an accounting system think people would not need this functionality at all times? Is this impacting anyone else yet?

Please vote on my idea to encourage Blackbaud to take this seriously. They are acting like it's not a big deal to take the hard close of a fiscal year away in web.

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Comments

Nikki Baldwin

Hi @Natalie Smith, just to be clear, you don't actually have to hard close or even soft close any periods in order to have the reports accurately reflect an EOY balance. The reports will automatically pull the data as if it's closed in a sort of mock close. Here is a detailed Knowledgebase on how that works:

.

The hard close functionality, which is deferred from webview at this time, only served to permanently prevent any further transactions from being posted in a designated fiscal year. It made no closing transactions/transfers of any kind. You can still soft close the periods to prevent users from being able to post to any periods/years you don't want new activity and lock down who has rights to edit those soft closed periods.

Natalie Smith

@Nikki Baldwin yes, I fully understand that the Income Statement and Balance Sheet will run with updated retained earnings balances without a soft or hard close. That's a great feature that keeps things moving. However, ALL reports do not work with your mock close functionality. Most critically the Trial Balance Report (unless I'm missing something).

My concern is that the actual retained earnings accounts in General Ledger>Accounts will never show the correct balance. Your answer below indicates you may want to refresh your reference point since the account balance does change once the hard close is performed. As an accountant I know that if all else fails (maybe something like the chart organizer not capturing all information since that is on Community a lot as an issue) I know that I can use an accurate trial balance to create financial statements to see where the problem may be. A trial balance report is accounting basics and for Blackbaud to dismiss it's use and functionality is why I have concerns about the accounting expertise that is advising the system.

In addition, the process of hard closing a fiscal year is good audit practice that I highly value. We hard close the fiscal year after our external audit and our external auditors value that process to ensure we are not making adjustments post-audit. Since nonprofits are highly audited this also seems like a critical function that Blackbaud isn't taking into account. In all your documentation regarding the change to web (I watched the latest webinar) there has been no mention of the removal of this functionality.

Nikki Baldwin

@Natalie Smith, if you check out the KB link I sent, it does indicate that the 'Trial Balance report mock closes prior year's net surplus/deficit at the beginning of the fiscal year for fund balance accounts designated as closing accounts."

I do understand the best practices aspect of this piece, for sure, and I fully support the promotion of the Idea Bank add for this, since it's currently deferred for webview. I just wanted to reassure you that your reports and account balances will not be affected by not having the option to hard close right now. The soft close, and tight internal controls around who can and can't open/close periods, should still be acceptable for audit passing – we have a great number of organizations who have never used the hard close option for over a decade or more, which is from where the deferred decision for the time being came. Again, the hard close never made any transactions/transfers of any kind to affect your account balances, it only permanently removed the ability to make any further transactions to the specific fiscal year. So I hope that gives you some peace of mind in the interim.

Natalie Smith

@Nikki Baldwin I read the Knowledge base article and many more around soft/hard close in the past few days before I contacted support. The article uses the term “pretends" to close the Income Statement to the Balance Sheet; which at the end of the day doesn't inspire my confidence.

I'm sure Blackbaud has it's logic as do other customers, but I don't agree with it. At the end of the day I want to have a Trial Balance report and account activity that accurately reflects entries and doesn't just pretend. I think for that I'll have to go to another solution.

Nikki Baldwin

@Natalie Smith, totally understand your perspective! Just so I'm understanding clearly, if the hard close, however, doesn't actually make any transactions/transfers – no journal entries – what is it that you'd be looking to have show differently on your reports that the hard close gave you that doesn't show today when you run those reports for the specified fiscal year end/start dates? Thank you for this conversation and feedback!

Jon Kalkwarf

@Nikki Baldwin
Not being a practitioner you have to understand the urgency of having a hard close. My balance sheet does NOT update without a hard close. This is a significant issue that Blackbaud needs to take seriously.

Nikki Baldwin

@Jon Kalkwarf, totally understand! Due to customer feedback, the hard close option will be coming to webview in a future release! For right now, we're limited to the soft close and other options we've discussed on this thread, but it is no longer the plan to have customers depend on the mock close of reports and soft closing of periods alone. Thank you for your feedback!

April Kulpa

@Nikki Baldwin Which quarter can we expect the hard close option in Webview?

Nikki Baldwin

@April Kulpa First half of 2025, possibly as early as Q1. Until then, your reports will update with the mock close and you can soft close to avoid additional data entry.

Natalie Smith

@Nikki Baldwin do you have an update for the hard close functionality? We are at year end and need this functionality. Thank you.

Nikki Baldwin

@Natalie Smith, yes! That functionality to hard close and run a pre-close report were released to everyone by Jan 24th. You should now see the option at the ‘header’ of the ‘Manage all fiscal years’ for ‘optimize’, ‘pre-close’, and ‘close’. If you don't see those options (and rights are good to go there) please let support know!

Natalie Smith

@Nikki Baldwin this is amazing! Thank you and Blackbaud for listening to Community on this one. I see the function so we should be all set.

Sylvia Cook

@Nikki Baldwin Is there a KB for pre-closing and close in NXT? Anything I read is pointing back to database veiw steps.

We started with NXT several years back and haven't hard-close a fiscal year. I think it is time I figure this out. Are actual journal entries being created in the closing process?

Nikki Baldwin

@Sylvia Cook, we have the in-product how-to information on managing fiscal years that gives some specifics there. There are no journal entries created during a hard close – you can see additional details I provided about the mock close on this thread and why it doesn't need to make any JEs. Keep in mind that hard closing is a permanent so make sure to check out optimizing a fiscal year (in same help topic) and consider that along with soft closing. It's not recommended to hard close until your audit is complete and typically is not the previous fiscal year, but 2 years prior.

Anthony Block

@Nikki Baldwin It's unclear if “optimizing” removes details like the old “summarizing” function did. If I optimize will all the details still be there? If so I'd be willing to try.

Having said that, in database, optimizing fiscal years didn't have any noticeable result for us. Will it have more of a result in WebView? It seems to me like much of the delay in running a report is in other steps: waiting for server to pick up request, queueing, etc. I'm afraid that telling customers to optimize their data is more for the benefit of Blackbaud's servers than for any of our individual sites' performance.

Nikki Baldwin

@Anthony Block, optimizing in webview does summarize transaction data for the fiscal year in question to help improve report processing speed. You do have the option to unoptimize years, as needed (show in screenshot from the same link I provided to Sylvia earlier in this thread). And of course, you can hard close without optimizing, if you prefer. I can't speak to how much time that could save you, as that varies by organization based on data input volume.

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