What is the Financial Close vs. Closing the Books?


The business world runs on facts and figures, and the fastest growing companies have a measurement process in place to continually propel them forward. But in the midst of the busy, stressful month-end close, measurement, improvement, and strategy get pushed to the side at many organizations.

What would change if you could create the headspace to focus on these value-adding activities any day of the month? And not only focus on them, but also get back to doing what drew you into this profession in the first place?

This isn’t as unattainable as you may think, and it begins with defining the full financial close.

Effectively increasing efficiency requires examining the entire month-end close process. By only optimizing parts of the process, you may miss what’s creating the big bottlenecks, and potentially create even more issues down the line.

Defining the full financial close—versus simply closing the books—will provide the holistic view your company may need to measure and improve your month-end processes.

Let’s get started.

Financial Close Definition

The financial close process includes reviewing and reducing account balances before the accounting cycle closes. It begins with recording the journal entry for each transaction and activity, which leads to the review stage.

We regularly talk to companies who “close the books” in three days. This typically means that all of their journal entries have been booked, and the high-risk transactions reconciled—but there is still a mountain of analysis and reporting to be done.

There may also be a level of risk, as companies that close within a short window often rely more heavily on estimates and accruals which may not be exact.

For this reason, the review stage is critical. Validating the data through balance sheet review and account reconciliations reduces your exposure to risk and fraud.

For the companies who are truly completing the full financial close in three days, we’re impressed—but only if you’re not sacrificing accuracy for speed.

Do you know how good your reconciliations are? For example, are they merely roll-forwards of recent activity or a simple listing of what is in your general ledger?

How carefully are your accountants doing the review and analysis? Do they understand the nature of the accounts and the expectations for a thorough review?

If you’re not validating the data, you may be exposing the company to risk, and this could have serious implications down the line. We know as well as you do that exposure to fraud is never worth it. So, take a moment to think through any possible areas of risk and exposure, and more importantly, what you might be able to do to mitigate that risk.

Finally, when you think about a full month-end close, what is the point of all of the preparation, review, and analysis without the financial statements?

This reporting stage is where items on the SOX compliance list are checked off, and the financial statements consolidated and produced. This is the goal of the financial close, and the last integral step in the process.

Fulfilling Our Promise Through Continuous Accounting

You may still be wondering about our promise to help you create the bandwidth to focus on the more strategic parts of accounting at any time of the month.

Enter Continuous Accounting.

This concept, along with BlackLine’s technology, allows you to perform financial close tasks throughout the month, while automating the manual tasks that are the most time consuming.

It makes sense, right? Why leave everything to the end of the month if you don’t have to? And for those of you who would benefit from being able to access the financial statements at any point of the month, we have great news: with BlackLine, you can.

Our Story

BlackLine began when a client asked for help managing their account reconciliation process. Since then, we’ve grown our solutions offerings by listening to what our customers need, and the result has been unprecedented visibility into transactions, maximized efficiency, and reduced regulatory risks.

But don’t take it from us. Head over to our Customer Success Stories page to hear directly from some of the clients we serve.