The financial close process is the structured sequence of accounting tasks—including reconciliations, journal entries, intercompany eliminations, and financial statement preparation—that finance teams complete at the end of each reporting period to produce accurate, auditable financial results.
A typical close involves:
-Reconciling all balance sheet accounts
-Posting and reviewing journal entries
-Eliminating intercompany transactions
-Consolidating results across entities
-Generating financial statements for reporting
BlackLine automates and centralizes each stage of this process, reducing close time by up to 70% while maintaining full audit traceability.
While many people will use the terms financial close and closing the books interchangeably, it’s important to understand the difference.
Financial close refers to all the financial and accounting processes that occur on a regular basis in a business leading up to, and including, closing the books on the prior month, quarter, or year. So, closing the books is just one part of the financial close.
While companies are all different, there are some key steps in the financial close process:
Identify transactions and record them in a journal
Post to the general ledger
Prepare an unadjusted trial balance
Reconcile debits and credits
Create adjusting journal entries
Run an adjusted trial balance and financial statements
Close the books and generate financial reports
The financial statements generated from the financial close are used by company management for analysis, comparisons, KPI generation, and other assessments of the business’s financial health.
Investors, lenders, and regulatory agencies may also use these statements—depending on the company, it may be required to provide these statements to those stakeholders.
Many organizations struggle with manual data entry errors and disconnected spreadsheet processes that severely slow down the cycle. A lack of visibility into the status of specific reconciliations and journal entries also creates significant bottlenecks for accounting teams.
Additionally, high volumes of transactions often require tedious, line-by-line matching procedures that consume valuable time and resources. These compounding inefficiencies frequently lead to elevated stress levels and a higher risk of reporting inaccuracies prior to deadlines.
Ready to optimize your financial close process? Unleash your team’s productivity with the only end-to-end financial close solution. Dive deeper into streamlining your financial close reading our whitepaper Fast-Tracking the Path to Financial Close Efficiency & Balance Sheet Integrity.
Modern accounting software like BlackLine automates repetitive tasks and heavily streamlines the entire financial close process. By centralizing data and standardizing workflows, these solutions significantly reduce the reliance on error-prone manual spreadsheets. Real-time dashboards provide unparalleled visibility, allowing controllers to instantly monitor overall progress and proactively identify process bottlenecks. Consequently, accounting teams can shift their daily focus from tedious data gathering to strategic financial analysis and exception handling.
The goals of the financial close are to enter each new accounting period (whether that be month, quarter, or year) with temporary account balances at zero and to consolidate and produce the financial statements.
How long it takes to complete the financial close process depends on many variables, including but not limited to, how complex the company’s finances are, the size and experience of the accounting team, and whether the company uses accounting automation.
Companies that use financial close automation software can perform financial close tasks throughout the fiscal period, while automating manual tasks that are the most time consuming, so they can close their books faster and complete the financial close process confidently.