Flectra is a great ERP system, With its inventory management, invoicing, purchasing and web site modules etc its a great enabler for business but I have battled to understand how the financial reporting works in a way that makes sense to an accountant.
Accounting & Financial Reporting
The current accounting module is not that great as it is difficult to view and query general ledger accounts and reconcile differences or discrepancies. E.G Why is the balance in account x currently y? It should be closer to z! Having to print out the entire GL report to try and trace the entries in account x only is time consuming.
But all that is at least manageable if not enjoyable to work with. The main problem I had was getting the reports to balance for year-end reporting and reconciling to the revenue service etc.
How to get the right balances on financial reports
This is my current understanding of how the financial reporting work and is presented to make sure I am not misunderstanding how things work with respect to reporting. Please help make this explanation better if you have a better understanding.
This is what I found out: (tldr;)
- there is no need for opening and closing entries other than the initial take on balances
- the trial balance report is almost meaningless either I/S items are correct and B/S items wrong or vica-versa
- the balance sheet report, when run, should never have a start date but a required end date
- the profit/loss report requires a start and end date to be accurate
- to get the reports to align you need to select the same end date for each report and the matching start date for the income statement. i.e if year end is 28 Feb. Then end date for BS and I/S should be the same e.g 28 Feb 2021 and start date 1 Mar 2020 for I/S when understanding how the BS changes since last financial year.
The longer version:
All the reports seems to just simply query the database for the date range specified and suck up all the gl entries to generate the balances on the gl accounts. For balance sheet items this has the effect of them having no opening balances and, in effect, just showing the movement on the gl account for the period. For income statement items this is probably what you want but not for balance sheet items.
Therefore to get the correct balance sheet balances at a particular date, since these account are cumulative, don’t enter the start date.
To get the correct Income Statement balance for the year/month/period etc you will need an appropriate start and end date. i.e the report simply sums up all entries for the date range.
If you want the reports to align you need to make the BS start or end date equal to to the end date for the I/S if you want period opening or closing balances.
This may seem obvious to others but is a little counter-intuitive to accountants and book keepers as they are used to sweeping these accounts to zero at year end.
With the above explanation it obvious why the trial balance is meaningless from an accounting point of view. If you have a start and end date, the income statement items are accurate but the balance sheet items are wrong. If you just have an end date the balance sheet items are accurate but the income statement items probably aren’t what you expect them to be for the period you are reporting on.
Initial Take On Balances
Since there are no opening and closing balances journal entries required for period end it makes it a bit of a problem when one needs to take on existing balances for the journal entry as there is no “retained earnings” account to credit.
If you started from year 0 using flectra for accounting you should not need this account as Flectra can calculate the cumulative profit/loss for you on the BS report but there is no history to do this with opening balances. Therefore the undistributed earnings account exists with gl account number 9999 (not sure how many 9s but its the only one so easy to find in the chart). This is left off the balance sheet report so you balance sheet will be not balance by this amount. To make it balance change the account number to one that is in the equity range 300500 for example.