![]() However, there is a key distinction between the two: Some finance teams use the terms “financial close” and “closing the books” somewhat synonymously. The financial statements are also used, and sometimes required, by external stakeholders, such as investors, lenders and public regulatory agencies. In companies with real-time systems, this analysis may be ongoing. The resulting financial statements are used by management to generate historical trend analysis, comparisons to prior periods and budgets, and to generate KPIs. For external financial statements, data for footnotes and other disclosures are also generated. In companies with multiple subsidiaries, the financial close also includes consolidating the division’s financial statements, analyzing for intercompany eliminations and other post-closing adjustments. The eight core steps are identifying transactions, recording transactions in a journal, posting to the general ledger, preparing an unadjusted trial balance, reconciling debits and credit, creating adjusting journal entries, running an adjusted trial balance and financial statements, and closing the books to reset income statement accounts to zero and lock in balance sheet accounts as of the period’s end. ![]() The term “financial close” describes all the financial and accounting processes that regularly occur in a business leading up to, and including, closing the books on the preceding month, quarter or year. Fortunately, there are ways to make this recurring process more manageable and give financial teams and stakeholders the time they need to conduct analyses and make strategic business decisions. Sequential steps - from recording transactions to generating financial statements - must be done efficiently, collaboratively and accurately before accountants can close the books on the current fiscal period. Regardless of a company’s size or financial sophistication, the financial close process can become convoluted. East, Nordics and Other Regions (opens in new tab)
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