Accounting Periods Explained | Let's Clear This Up!

What's going on everybody? It's Richard Coburger here, the blue collar nerd. So I couldn't help but notice that there's been a bit of confusion about some of the accounting changes that have been rolling out recently, specifically around accounting periods. So this video is to hopefully clear some of that up. So a couple of months ago I put out this video about the touchless journal entry integration, which if you haven't already seen it, I highly suggest you do because it's important to know about first of all, but it's also going to give you some context that's going to help you understand this video. But basically there is now a way to export journal entries to your accounting software instead of individual documents, which effectively eliminates export errors. And there is a new touchless integration which eliminates the need to export altogether and auto syncs your changes that you make in Service Titan back to your accounting software. And with all of that comes accounting periods, which gives you the ability to edit edit exported transactions while maintaining control over when things are locked down and can no longer be edited. Now, to be transparent with you here, when I first made that video about the touchless journal entry integration, I didn't realize that the accounting periods piece of it was going to affect people who were still on the document based integration. If I did, I would have spent some more time clarifying how those two things interact. But hopefully we can rectify that with this video. So as it turns out, whether or not you are using the touchless journal entry integration, you will now have accounting periods. And that's because it's a useful feature regardless of whether or not you're using the touchless journal entry integration. You see, with the touchless journal entry integration, everything syncs between Servicetitan and your accounting software in near real time. So we don't really have this concept of exporting anymore to lock things down and prevent them from being changed. So in that scenario, accounting periods serves as the new mechanism to control when things are locked, when things are marked as finalized and they can't be changed. But if you're on the document based integration, accounting periods bring some key benefits to you as well. One being that you can now make edits to transactions even after they've been exported by reopening the accounting period. And the ability to edit exported transactions has been a highly, highly requested feature for a very long time. And yes, I am aware that there are some of you out there who had backend configurations enabled that made editing of exported transactions possible even before. And I'LL address that later in this video. But in addition to now having the option to edit exported transactions, accounting periods brings another key benefit as well. So, okay, previously exporting a transaction that blocks that transaction, you can't change it anymore, right? We export an invoice, that invoice can no longer be changed. But there were still technically changes that people, other employees could make to your historical periods in service titan that would end up messing up your books, for example. Okay, yes, they can't edit those exported transactions, but they could still create new transactions. Somebody could create a backdated adjustment invoice or add a new appointment to a job that's three months old. And some of you might be thinking, well Richard, I want to be able to do those things. And if you're thinking that you probably have an operations based role in your company, not not an accounting based role. And that's the point. It's very easy for an operations minded person like myself, by the way, I worked in operations. And it's very easy for somebody of my operation based mind to accidentally do something that it might solve an operational problem, but it totally screws up the accounting side. Let me give you an example. So let's say that we did an install for Tom Howard in October of 2024 and he owes us $10,000. So that means we now have $10,000 in AR accounts receivable and $10,000 in revenue because we're assuming that that AR is collectible. So our balance sheet for October is going to show that $10,000 in AR and our P and L, our profit and loss is going to show that $10,000 in revenue. But then Tom's late on the payment. We keep calling him, he keeps telling us he's a little illiquid at the moment. And finally In March of 2025 we, we decide, okay, this guy's never going to pay us. Let's just cut our losses and write it off. Okay, well let's say that in order to do that, somebody goes into the original job in October of 2024 and creates an adjustment invoice with a negative $10,000 task on it to zero out that invoice, to zero out the ar. And in the date field for that adjustment invoice, they put the date of the original job in October 2024. That's bad. Why is that bad? Well, we have now retroactively changed our financial statements. So this 10k write off, it should show up on the P and L, the profit and loss as a bad debt expense and it will on our old October PL. So when I look at my current PL in this example, it's now March of 2025. When I look at my March 2025 P&L, that $10,000 expense is nowhere to be found. So that's a $10,000 loss that I just never see. Plus now our balance sheets between the date of the job in October 2024 and the time we decided to write it off in March 2025, those are all inaccurate. The purpose of our financial statements is to record what is actually happening during that period. So during that period we did have that ar, we had not decided to write it off yet. And when we do decide to write it off, we need to see that decision reflected in the financial statements for the month that we decided to do that in, which doesn't happen if we backdate the adjustment invoice. If we do that, then we are recording the write off in a month where it didn't happen. And it's going to hit financial statements that nobody's ever going to look at because nobody looks at the financial statements for six months in the past. Plus, to take it a step further, let's say you went and you got a bank loan and you showed them those financials. Well, you've now retroactively changed the financials that you showed to the bank that the bank used to decide whether or not they should give you a loan. They don't like that. Plus that 10k, that's a tax write off and you're now writing it off in the wrong year. You're writing it off in 2024 instead of 2025. The IRS doesn't like that. Plus maybe you've submitted your taxes already and now you're missing out on that write off altogether. So in conclusion, backdating adjustment invoices. No good. And before we had this accounting periods feature, there was nothing stopping somebody from doing that. But now in that exact same scenario, if you're, if the October 2024 accounting period is already marked as closed, which it should be, if it's that far in the past, then the system isn't going to let them create a transaction in that period that's much safer because that's now going to force them to do the right thing, which is date the adjustment invoice, today's date, the date when they're deciding to write it off. Okay, so now that we're clear on all of that, let me explain how accounting periods works. If you're using the document based integration. So if you're on the document based integration. Accounting periods is layered on top of the old manual exporting experience and it's set up by default to mirror the way that that used to work. And before we get into all of the details, let me just go ahead and throw it out there, that in my very honest opinion, the way that accounting periods works with the document based integration is a little bit less intuitive than the way it works with the touchless integration. Some of the things that make it a little bit more confusing are going to be tweaked in the Spring 2025 release, and I'll point out what those things are when we get there. So one thing that might be a little bit confusing is that when you're using the touchless integration, when you look on an invoice and you see on that invoice accounting period closed, that always means exactly what it sounds like every time. It means that the month that that invoice is inside of is marked as a closed period. So when an invoice, for example, gets exported, you'll see the export status on that invoice change to just like before. But you'll also see the period status on that invoice change to closed. But with the document based integration, we're mimicking the old behavior. So you know how when you export a transaction, that transaction is now locked from being changed, right? Well, we're mimicking that same behavior with accounting periods. The difference is that now if you do want to edit something that's already been exported, you have a way of unlocking it. So when you export an invoice, the invoice is going to say that the accounting period is closed, but actually the entire accounting period isn't closed, it's just that document that's closed. So that piece could be a little bit confusing. With the document based integration, when you see accounting period closed on a transaction, it could potentially mean multiple things. It could mean that the entire accounting period is in fact closed, or it could mean that just that individual document is closed.

But.

But other stuff in that period is still open. However, if you don't like that and you don't want that old behavior being mimicked, there is a setting coming very soon. It's coming in the 71.2 release that's going to enable you to choose whether or not documents get marked as closed when you export them. So with that setting, you could choose for the period status to always mean that. If it says period status open, that means the entire period is open and transactions are going to remain editable even after you export. They won't be locked until the period is marked as closed. So let's jump into the accounting screen here and click on this tab for accounting periods. So this is how it works. Right now, some of this is probably going to change with the Spring 2025 update, but for now, here's how it works. So let's say we are within this accounting period, November 2024. If I export some of the invoices that are within the this date range of November 2024, then I'm going to see the period status on those invoices say closed. However, when I come to this accounting period screen, the November 2024 status is still going to say open. Now, that's a little confusing because it's not true that this period is fully open. It's actually partially closed because some of the invoices within this period are closed and some are not. So really the status should say partially closed.

And.

And with the spring 2025 update, it will, but for now, it's just going to continue to say open. So if I wanted to edit one of the exported transactions that's been marked as closed, that is within this period of November 2024, I would come in here and reopen the period. And you might be reasonably asking, Richard, how do I reopen the period if it already says that it's open? Well, you would come over here to this kebab menu and you would say open period, and it's not gonna look like anything happened. But now all of the closed transactions within that period are open again. I know it's not ideal, nor is it reasonable to have expected you to know to do that without being explicitly told. But for now, that is how it works. And again, that's going to be better once the status changes to partially closed by itself, because then you can just directly reopen it. Now, something that I do need to point out here is that we can only open and close entire periods, not individual documents. So what I just did opened the entire period of November 2024. So all of the invoices and payments within that period are now editable. And were I to come over here and mark it as closed again now, everything within that period of November 2024 is no longer editable. Now, some of you who use QuickBooks Desktop had a feature gate enabled. There's a backend configuration called Export Transaction Updates. And that configuration gave you the ability to edit exported transactions before accounting periods was ever a thing. And it gave you a little sync button so that you could sync the changes that you made back over to QuickBooks Desktop. And that configuration actually still works. It's just that Accounting periods is now layered on top of it, so you won't be able to edit any invoices or payments and you won't see that sync button until you open the accounting period that the transaction is inside of. There is also a small handful of you who had a date different feature gate enabled called allow exporting of exported data and accounting periods replaces that functionality. So if you are one of the few who had that one turned on, that one doesn't do anything anymore. Accounting Periods is the new mechanism to allow for exporting exported data because it allows for more control. One more thing that I want to point out is that there is a setting for accounting periods that automatically closes the previous accounting period on a certain date. And originally that setting was defaulted to on for many of you, but because that seems to cause some confusion, we're now rolling that back. So this is really, really important. If you are scrolling on your phone right now or you've drifted away to another tab, bring it back in, Bring it back in. Something very important. A setting is going to change by itself. So the setting for automatically closing accounting periods used to default to on and it's now going to change to default to off. Again. That means a setting is going to change by itself. I just really want to make sure that you're aware of this now. Now, there is one exception to this rule which is that if you have gone in and changed the auto close date to a date earlier than the default of the 28th, which the 28th was the latest possible choice. So if you changed it at all, then you changed it to be earlier. Well then in that case we assume that you are aware of the setting and you want it on. So if you change the auto close date, it's not going to turn itself off on you, but everybody else. If you want accounting periods to auto close, then you're going to have to go back in and toggle that setting back on and you find the setting under Settings, Accounting and Accounting periods. And it's this setting right here, auto close. And it's a really good idea in my opinion, to have auto close on because without it you have to manually close periods or else they stay open in perpetuity. And if they stay open in perpetuity, then you're back to being vulnerable to things like backdating issues, just like the example that I gave earlier in this video. So if you feel and look I'm going to take my Service Titan employee hat off for a second and we'll call this Richard's opinion as a friend. I'm giving you my opinion as a friend. If you feel that you regularly need to edit transactions that are older than a month old. Because remember, if it's once in a blue moon, you can reopen closed periods. So if you're wanting to turn auto close off, that tells me that you're feeling like you regularly need to edit really old stuff. You should take that as a red flag that there might be something going on operationally that needs to be tightened up. Okay. Putting my service site and employee hat back on. So I'm not exactly sure right now when this rollback is going to happen, when setting is going to change, but I'll find out for you and I'll edit it in right here so that you know when to go back in and check that setting. Another thing worth pointing out is that there are permissions related to accounting periods. The main ones you want to look out for is the ability to open and close accounting periods. You want to make sure that only a select few have that ability. So to recap, if you're using the document based integration, then what's the point of accounting periods? What's the benefit? Well, mainly it's that ability to edit transactions even after they've been exported. That's been one of the top requested features in the Ideas portal for a long time and accounting periods allows for that. Plus it prevents new transactions in historical periods, which could screw up your books and potentially get you in legal trouble. But what if you already had one of those feature gates turned on that already allowed you to edit exported transactions? What's the benefit then? Well, in that case, the ability to edit exported transactions won't be new to you, but the safety net of preventing transactions in historical periods will be. Plus, with those gated features, there was no locking things down, so you were able to edit exported transactions forever. So with accounting periods you get that extra layer of control to be able to lock things down and say, yes, you can still edit these exported transactions, but not those exported transactions. So accounting period still buttons up a lot of vulnerabilities for you. But anyways, that's all I got for today. Hopefully that cleared some things up. Be sure to hit like if you like this video and found it valuable, be sure to subscribe to surface Titan's YouTube channel. If you haven't done that already, hit that bell icon so that YouTube notifies you anytime we upload a new video. Appreciate it. Peace.

Sam.