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 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.
