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Top 4 Financial Close Best Practices in 2024

Updated on Jan 12
4 min read
Written by
Cem Dilmegani
Cem Dilmegani
Cem Dilmegani

Cem is the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per Similarweb) including 60% of Fortune 500 every month.

Cem's work focuses on how enterprises can leverage new technologies in AI, automation, cybersecurity(including network security, application security), data collection including web data collection and process intelligence.

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The closing period is arguably the period with the heaviest and most stressful workload in accounting procedures. That is because, in a brief time, the CFOs have to zero out the balance of the provisional accounts to be ready for the next accounting period.

The process; however, is usually bogged down by several different handicaps, including, but not limited to:

  • Late ledger adjustments,
  • Newly discovered discrepancies in reconciliation,
  • And, ultimately, ensuing revisions to reports and disclosures. 

Automating the process will help CFOs to overcome these challenges. In this research, we are explaining four best practices for CFOs to implement and work with an automated framework for financial closing.

1. Understand the dependencies

Without a clear understanding of how the steps in the financial close checklist are dependent one another, it is difficult to improve and automate the process. Therefore, it is of the utmost importance to know about, and understand, the main 8 steps involved in financial closure.

1.1, Identifying transactions

Accountants should sort through the transactions to see which ones will make their way onto the journal and the general ledger. Intercompany transactions of parent companies, for instance, should be overlooked because they neither count as loss nor revenue for them. 

1.2. Journal entries

The raw data of the transactions – date, description, serial number, etc. – have to be included in the journal. 

1.3. Posting to the general ledger

The amounts pertaining to each transaction that has been entered into the journal have to be included in the general ledger. We say “general” because for each account – receivable, payable, etc. – there exists a dedicated account ledger. All these have to be consolidated.

1.4. Running an unadjusted trial balance 

All the debit and credit amounts have to be written in a double-entry format to make sure the money leaving each account matches with the money being spent. For instance, if there was a cash infusion on one side, the expenses that were paid with that cash should match each other. 

1.5. Posting the adjusted entries 

Sometimes, movements in accounts will happen after the close. For instance, if the books have to be closed on the 28th, but utility bills are due 29th, adjustments have to be made. That means the accountants’ expenditure accounts should reflect the assumption that the bills on the 29th have been paid by the 28th. 

1.6. Running an adjusted trial balance 

The discrepancies found with the unadjusted trial balances should now have been eliminated following the adjusting entries and an adjusted trial balance have to be posted. 

1.7. Create financial statements 

Transport all the finalized financial data onto the balance sheet, income statements, and other financial documents, all known as financial statements. 

1.8. Posting closing entries 

The preceding month’s transactions have to be zeroed and the temporary accounts cleaned off. Only the retained earnings have to be posted on the company’s permanent account. 

As we’ve illustrated, each step depends on an accurate and thorough undertaking of the preceding task. In financial close, all the steps are dependent on one another. That’s why it’s important for businesses to understand the inter-dependencies between tasks. 

2. Determine which tasks benefit the most from automation 

It’s important to know which tasks can benefit the most from automation. Journal entries, for example, are one of the main, and most time-consuming steps, in the close process. They involve entering all the transactions of the company in the preceding month, which sounds simple, but often takes the majority of time allocated to the close process.

Automating journal entries would allow for the solution to identify and record all transactions in real-time. So when the close period arrives, the accountants already have that task done for them. And they just have to double-check them. 

Another candidate would be intercompany reconciliation. If accountants are reconciling balances manually, they would have to know the tax code of the area in which the parent company or subsidiary in question is operating, so they can deduct the taxes accordingly. An automated solution leverages RPA and orchestration in order to identify intercompany transactions as such and to then implement the appropriate tax.

The bottom line is, CFOs must narrow down on the specific tasks that can be automated, and stand to gain the most from.

3. Monitor the progress with dashboards

Because the financial close is an interdependent and step-by-step procedure, it’s important for all involved personnel to monitor the progress.

For example, in journal entries, some transactions, like deferred payments to vendors, have to be reversed from credit to debit once they have been cleared off. However, for that to happen, such transactions have to be referred to the correct person who was responsible for them in the first place.

Deploying an automated solution software will allow for dashboards dedicated to each process to see their progress in real-time. Thanks to orchestration and predictive modeling, the solution will give an estimate of task duration, helping everyone have a realistic timeline of when the close will be realized for the creation of financial statements to take place.

Lastly, because the reports created from financial close (i.e. balance sheet, cash flow, income statement, etc.) ultimately get analyzed by high-level executives to make decisions regarding the present and the future of the company, the process must be as accurate, transparent, and accessible as possible. 

4. Transform the workforce

To make the most of the software applications, you have to hire personnel who are not only competent in finance and accounting but also in using modern automated solutions.

For more on financial close

If you are interested in learning more about how automated solutions can help your close process, read:

And if you believe your business can benefit from adopting a financial close software solution, we have a data-driven list of vendors prepared.

And we can help you find the right tool for your business:

Find the Right Vendors
Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem is the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per Similarweb) including 60% of Fortune 500 every month.

Cem's work focuses on how enterprises can leverage new technologies in AI, automation, cybersecurity(including network security, application security), data collection including web data collection and process intelligence.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Cem's hands-on enterprise software experience contributes to the insights that he generates. He oversees AIMultiple benchmarks in dynamic application security testing (DAST), data loss prevention (DLP), email marketing and web data collection. Other AIMultiple industry analysts and tech team support Cem in designing, running and evaluating benchmarks.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised enterprises on their technology decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

Sources: Traffic Analytics, Ranking & Audience, Similarweb.
Why Microsoft, IBM, and Google Are Ramping up Efforts on AI Ethics, Business Insider.
Microsoft invests $1 billion in OpenAI to pursue artificial intelligence that’s smarter than we are, Washington Post.
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Public-sector digitization: The trillion-dollar challenge, McKinsey & Company.
Hypatos gets $11.8M for a deep learning approach to document processing, TechCrunch.
We got an exclusive look at the pitch deck AI startup Hypatos used to raise $11 million, Business Insider.

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