Year-end is often a high-risk phase in the accounting cycle. The process should be accurate, repeatable, and well-controlled. It also needs to be agile enough to support a clean start to the new year. This guide provides an educational walkthrough and tips drawn from real-world Microsoft Dynamics 365 Business Central use. Gain practical insights into how to close a fiscal year in Business Central.
Preparation Checklist
A smooth close begins before selecting Close Year. Before you begin the close process, confirm the following:
- Finalize operational activity: Post routine transactions (sales, purchasing, payroll, expense reports, fixed asset depreciation).
- Reconcile subledgers to the general ledger: Accounts receivable, accounts payable, bank, and, if applicable, inventory and project ledgers.
- Review control account settings: For control accounts (A/R, A/P, cash, inventory), set Direct Posting = No to reduce the risk of out-of-balance issues.
- Handle currencies and allocations: Complete foreign currency revaluations and allocation routines.
- Draft reporting: Run a trial balance and key financials to identify anomalies early.
- Sandbox dry run (recommended): If this is your first year using Business Central or configurations changed during the year, rehearse the close in a sandbox environment.
A 30-minute dry run in a sandbox may save hours of rework and audit back and forth.
Step 1: Create the Next Fiscal Year
Why it matters: Defining the next fiscal year first supports period continuity and mitigates blocking downstream steps.
How to do it:
- Use global search, type in, and select Accounting Periods.
- Navigate to Create Year (Home tab).
- Enter the starting date, confirm period length (commonly 1M for monthly), and create.
- Verify that the new year, e.g., 2026, appears with the correct period breakdown.
Pro tips:
- Match your corporate fiscal calendar precisely. Misaligned dates may affect reports and allocations.
- If using 13-period calendars or 4-4-5 structures, check the sequence and period lengths before proceeding.
Step 2: Close the Fiscal Year
What this does: Marks all periods in the year as Closed in Accounting Periods, designating them as historical.
How to do it:
- From Accounting Periods, choose Process > Close Year.
- Verify the dates for the year being closed.
- Confirm to close the year.
Risk-aware guidance:
- Irreversible period flag: Once you close the fiscal year, the accounting periods are marked as closed. If you later identify missing transactions, you’ll need to post adjusting entries (see Step 5) and re-run the Close Income Statement process.
- Posting is still possible: Closing doesn’t automatically block back‑dated postings. Posting access is governed by Allowed Posting Dates (global and user‑specific). Learn more about this in Step 6.
Step 3: Run Close Income Statement
What this does: Generates a General Journal of “closing entries” that zero out income and expense accounts and move net income to Retained Earnings. Entries carry a special Closing Date, e.g., C12/31/2025.
How to do it:
- Use global search, type in, and select Close Income Statement.
- Complete the following options:
- Fiscal Year Ending Date
- Journal Template and Batch, e.g., Template: General; Batch: YE Close
- Document No. for audit traceability
- Retained Earnings Account
- Post to Retained Earnings: Choose Balance or Detail
- Dimensions: Select required dimensions, e.g., Department, Project
- Select OK to generate journal lines.
Note the “C date:” Business Central uses a C prefix, e.g., C12/31, to tag closing entries. This allows reports to include or exclude them without affecting operational postings.
Step 4: Review & Post the Closing Entries
Review steps:
- Navigate to General Journal > Year-End batch.
- Confirm all income and expense accounts are represented and debits equal credits.
- Verify the Retained Earnings line matches the year’s net result.
- Check for C dates and consistent descriptions.
Use Preview Posting before committing. Once validated, post the journal.
Quality checks:
- Run a trial balance (including closing entries) for the closed year.
- P&L accounts should be zero. Retained Earnings should reflect the net result.
- Save PDFs of pre-close and post-close trial balances.
Step 5: Post-Close Adjustments (If Needed)
Adjusting entries can be posted to a closed year under controlled conditions.
Control the window:
- Global control: In General Ledger Setup, adjust Allow Posting From/To.
- User overrides: In User Setup, grant temporary prior-year access to specific roles, e.g., Controller.
Workflow:
- Expand posting dates.
- Post adjustments dated to the prior year (not C date).
- Re-run the Close Income Statement to capture net adjustments.
- Re-post the closing journal.
- Return posting dates to restrictive settings.
Step 6: Lock & Finalize
Once the year is complete:
- Tighten posting dates: After completing year-end activities, set Allow Posting From to the first day of the new fiscal year and Allow Posting To to the last day of that year. This approach is designed to prevent additional postings to the prior year, except for authorized adjustments.
- Close inventory periods, if applicable.
- Archive reports and ledgers required for audit.
Year-End Close in Business Central at a Glance
| Step | Action | Why It Matters |
|---|---|---|
| Prep | Reconcile, finalize, dry run | Reduces rework and audit delays |
| 1 | Create Year | Supports period continuity |
| 2 | Close Year | Marks periods as historical |
| 3 | Close Income Statement | Generates C-dated entries |
| 4 | Review and post | Updates retained earnings |
| 5 | Adjust (optional) | Controlled corrections |
| 6 | Lock and archive | Preserves evidence and enforces policy |
Troubleshooting & FAQs
“We closed the year too soon.”
Expand Allowed Posting Dates, post missing entries, and re-run Close Income Statement.
“The Close Income Statement batch created no lines.”
Check the fiscal year-end date, batch selection, and whether P&L accounts had net changes.
“Some P&L balances remain after closing.”
Look for late postings or missing dimensions. Post and re-run the close.
“Retained Earnings posted to the wrong account.”
If unposted, delete and regenerate. If posted, reverse or post a corrective journal, then re-close.
“Users can still post to last year.”
Restrict Allowed Posting Dates and remove user-specific overrides.
Key Concepts to Remember
- Closing is iterative. You can re-run Close Income Statement to capture late adjustments.
- C dates are distinct. They separate closing entries from operational activity.
- Policy governs access. Closing a fiscal year in Dynamics 365 Business Central does not prevent you from posting adjusting entries. Whether users can post, and for which dates, is controlled by Allowed Posting Dates at the company level (General Ledger Setup) and, if needed, user‑specific overrides (User Setup).
How Forvis Mazars Can Help
Ready to make your year-end close seamless and audit-ready? By following the steps and tips in this guide, you should be well-equipped to support accurate financial reporting and position your team for a clean start for the new fiscal year. Connect with the Microsoft team at Forvis Mazars for tailored guidance or hands-on support to close a fiscal year in Business Central. Our experienced professionals are here to help you close with confidence.
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