• January 29, 2023
  • Alaa Mostafa
  • 0

What is financial close?

Refers to a recurring review and reconciliation process, leading to the delivery of the financial statements and reports needed for a detailed view of the company’s fiscal situation. In other words, financial close is the sum of all the financial management activities that accounting teams undertake to “close the books” in a specific time period, such as a month, a quarter, or a fiscal year. The end goal of an accounting close is to deliver detailed and comprehensive reports, including:

  • Balance sheet or statement of financial position
  • Income statement or profit and loss statement
  • Cash flow statement

Key steps in the financial close process

There are basically five steps in the financial close process: record, analyze, close, consolidate, and report. When the closing deadline is established, the balance of all the financial statements must be reconciled so the books can be closed and the process started again for the next fiscal period.

Record, analyze, and consolidate

  • Creating transactions involves recording assets, liabilities, equity, revenue, and expenses from across the business for that specific fiscal period.
  • Performing accounting includes additional tasks such as account analysis and reconciliation, revenue recognition, calculating depreciation, and accrual accounting.


  • Entity close is the point where you have stopped recording and reconciling transactions and are ready to reconcile and close the books.
  • Corporate close occurs after the books are closed and includes additional steps needed for financial consolidation across divisions and legal entities including mapping to a common chart of accounts, for some translation to a common currency, intercompany eliminations, and calculation of investments. As midsized business grow, they will need to automate and integrate some of these activities and gain faster access to control and validation checks.


  • Performing financial reporting is the last step in the financial close process. As reporting becomes more complex and demanding, finance teams are feeling the pressure to deliver faster, more flexible reports. Mobile device interfaces and powerful financial management systems are an ideal answer for running personalized, real-time reports anywhere, anytime.

Source: SAP insights 

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