Building Blocks of a Successful Financial Close Process

Follow these tips to increase accuracy and reduce surprises.

Financial close systems, processes, people and their interconnectivity can be complex, but successful improvements to the process can be achieved by introducing some simple building blocks that are inexpensive to implement.


Regardless of company size or complexity, all successful financial close processes require continuous communication, comprehensive documentation and a flexible, responsive organization. The degree to which each building block is implemented will vary based on company size, type of industry, availability of resources and management commitment. However, omitting one or two of these building blocks may result in some type of failure during a month-end close.



It is natural to assume that the intended audience of your financial close communication plan includes only the financial types: accountants, bookkeepers, treasurers, business unit heads, financial analysts, CFOs, controllers and others closely associated with the close process. While it is critical to include people in these roles in those communications, it could be fatal to a month-end close to include only these people. The larger or more widespread the organization, the wider the communication net should be cast. Providing communication via multiple channels and mediums will be rewarded through lower overall risk.


Gather and update contact information. Include all participants in the month-end financial close process. Don’t forget consultants, subcontractors and suppliers. Information collected should include home emails, mobile phone numbers and alternate phone numbers.


Publish a financial close calendar. The calendar provides a year at a glance so you can plan around holidays and vacations, and avoid potential internal and external business disruptions. Alert partners outside of the financial close process of key dates to avoid conflicts with system upgrades, maintenance, company picnics, training events, fire drills and building events. Send vendors and other third-party service providers an appropriately worded cover letter of the financial close dates and other information.


The calendar should provide contact information for escalating problems during the close process for each business unit, location or country. Include email, office phone, mobile phone and any other internal communication channels such as instant messaging details. List hours of contact and alternate contacts. Include dates and times for when the financial systems can be operated and updated. Publish cutoff times for general ledger or other key systems in the local time zones.


Hold month-end close conference calls. You should hold a call each day of the close process to gather feedback on progress, and to allow for issue escalation and sharing of any key information. Use the call to track issues and provide feedback to all participants on the progress or status of all relevant issues.


Provide instructions. Include a quick review of the close process at a glance via passive (website) or active means (email).


Publish an exception hierarchy. This includes materiality thresholds and methods (approval template) for seeking approval of post-close adjustments for financial line corrections.


Hold a post-mortem meeting. This post-close meeting should be held in a timely manner to review issues and key performance indicators (KPIs). It should include a discussion that helps the organization learn from its financial close practices.


All communication, methods of delivery and feedback mechanisms may be in place but will be ineffective without the knowledge and experience of the workers executing the financial close. To overcome this limitation, successful organizations reap the knowledge of their investment in employees through various forms of documentation.



When practiced and integrated into the financial close processes, a strong internal control environment will improve month-end accuracy and remove barriers to timely completion. Whether automated or manual, each key process should be protected by one or more of the following internal control types:

  • Preventive control—prevents the occurrence or introduction of an error.
  • Detective control—detects the presence of an error.
  • Corrective control—detects and corrects an error in a process.


Require a month-end journal-entry checklist. This detective control should require each area that creates journal entries to use a standard month-end checklist that includes all details about the journal entry such as the owner, type (revenue, expense, asset, liability, etc.), brief description, date executed, effective date, amount, legal entity number, general ledger account number, cost or profit center number(s), account name, journal number identifier, currency, and other local system ledger information. A reviewer independent of the owner should verify that the journal entry has been posted as expected by viewing the financial system accounts or reporting and updating the checklist accordingly. Exceptions should be reviewed and corrected during the close process before the final system cutoff. This checklist should be an essential component of the organization’s corporate governance compliance process.


Implement journal-entry templates. This preventive control requires each area that creates journal entries to use a standard template for each type. The templates would have as many attributes prefilled as possible to ensure accuracy (legal entity or corporation number, account, center); contain hidden help (acceptable date formats); and detect errors (debits and credits are not equal and offsetting). Templates should be maintained in an online library, assigned a specific journal identifier and have a narrative describing the nature of the transaction posting. In addition to the minimum attributes required by the local general ledger posting system, an effective organization also requires contact information identifying the area, owner or creator in the details available for detailed querying of posted transactions.


Verify report attributes. This multifaceted control can detect, prevent and correct errors. Require each area that creates or runs financial reporting (for internal or external users) to use a standard checklist to verify report attributes. Parameters of accuracy should be established for key report elements to indicate a level of comfort from historical reporting and the experience of senior-level report creators.


Report reviewers should scan the reporting for accuracy indicators and sign off on checklist items. The review process should use comparative periods (prior month, prior quarter, prior year). Investigate and document large-dollar, large-percentage and other anomalies in variances. Document all exceptions for supervisory review. Supervisory review is performed before the report is issued, with particular attention paid to all exceptions (variances) noted.


Create and maintain standard operating procedures (SOPs). Require each financial close participant to create and maintain SOPs. Procedures provide the end user with the detail required to execute all month-end deliverables such as journal-entry posting (accruals, recurring-entry setup), financial system querying, financial system report processing, consolidation rules, allocation processing, financial system maintenance and tax rate processing. Every SOP should have an owner and a freshness (last updated) date. Owners should periodically update SOPs by indicating date last reviewed for applicability or date of last revision. Reward SOP owners for timely updates.


Develop contingency plans. Require each financial close area to create a business-continuity or disaster-contingency plan to address scenarios involving an involuntary “out of office” or “system unavailable” for an extended period of time overlapping a month-end close process. Staff should participate in tests to ensure they can react to an unexpected outage by following the plan (alternate site or home-based sign-in). The organization should periodically test and measure compliance, and identify and implement changes when actual outcomes do not match expectations.


Distribute escalation procedures. Provide escalation procedures to all month-end financial close participants for help in troubleshooting and resolving financial-related issues. The procedure should include a mechanism for contacting subject matter experts for problems outside of the normal everyday help-desk types of problems when time is of the essence during the close days. The escalation events should be categorized and identified to a specific helping group.


Expectations for resolution and the time allowed before escalation to the next level should be provided to the affected area(s) and their immediate management team. When a companywide problem is identified, personnel throughout the company should be promptly notified with a stated time of expected resolution. Periodic updates are broadcast widely with instructions.


Maintain risk and control matrices. These should cover all key aspects of the financial reporting process. Ensure narratives, flowcharts and other documentation are kept up to date for the company’s corporate governance compliance. Key controls should be documented and tested with changes in procedures triggering an update to the internal control environment. Self-assessments should be performed to measure the effectiveness of an internal control linked to a specific type of financial reporting risk. The risk and control matrices should be reviewed by corporate governance experts (internal or external compliance personnel) to ensure an appropriate level of controls is in place to fit the risk profile (completeness, cutoff, presentation, recording, safeguard assets, validity, valuation and fraud). Risk and control monitoring should include company, department and secondary controls appropriate for the type of business models in place.



It does not matter whether your organizational structure is centralized or decentralized, or run locally, regionally or from another continent. The structure should be organized in such a way as to be responsive to the needs of all entities and participants in the month-end financial close process. Therefore, the flexibility of all close participants is required to respond to business changes, new risks, system issues, disaster contingency and other scenarios that could impede progress.


The financial close process should be managed like a cross-functional project. Unlike a one-time project, improvements can be achieved and successes measured every 30 days. Input from all participants is important, and the organization’s responsiveness to issues is critical to becoming a learning organization.


Encourage learning and share best practices. Encourage a culture of learning and sharing of best practices by rewarding active participation, hosting post-mortem meetings and regularly rotating a control group that monitors month-end activities.


Meetings should be run efficiently by publishing each day’s agenda in advance and providing all necessary reporting available (issues being tracked, financial system report execution updates, logistic updates) that enables financial close participants to check and report on the status of their individual progress. Since time is of the essence, meetings should start on time and be facilitated to track time spent on each update required by each group and provide a sounding board for problems. The control group could take on the role of facilitator and coordinate the agenda, group updates, document tracking of issues and the subject matter expert assignments.


Track KPIs. Gather, review and disseminate KPIs pertaining to the various month-end financial close processes representative of all participants. Each participating area should provide timely information to the control group for inclusion in company-level KPIs. The control group should publish guidelines for KPIs to encourage consistency and provide examples that are representative of the larger population. Each area should maintain KPIs specific to its local processes in addition to those being provided to the control group, if they are important to the success of the local close process. Provide assistance with root-cause analysis and potential solutions to those areas with KPIs that indicate below-average performance. Local areas that have improved their KPIs should share the success during the next available post-mortem close meeting to encourage other groups and be a potential resource of assistance.


Track issues and solutions. Require all month-end issues and associated solutions to be reported, tracked, documented and made available to all participants for learning and sharing. All issues should be prioritized and a time frame for resolution listed with its owners. Issues should be categorized as universal, regional or unique to a particular group for ease of identification and impact monitoring. Repeat issues should be reviewed for alternative solutions and other preventive measures communicated. A task force may be assigned for universal issues.


Celebrate success. Successful month-end financial closes should not be just a sigh of relief but a celebration that rewards the sharing of best practices. Reward key participants with an appropriate level of appreciation equal to their efforts such as additional time off, casual dress-down days and congratulatory announcements (verbal, email, Web cards). Month-end close responsibilities should also be incorporated into the annual performance goals.





 All successful financial close processes require continuous communication, comprehensive documentation and a flexible, responsive organization.


 Communication involves all participants in the month-end financial close process. Don’t forget consultants, subcontractors and suppliers. Gather contact information of all participants including home emails, mobile phone numbers and alternate phone numbers.


 Publish a financial close calendar that provides a year at a glance to allow planning around holidays and vacations, and to avoid potential internal and external business disruptions.


 Hold month-end close conference calls each day of the close process to gather feedback on progress, and to allow for issue escalation and sharing of any information key to the financial close.


 Before each close, provide instructions and an exception hierarchy; after each close, hold a post-mortem meeting to correct problems and celebrate successes.


 Integrate a strong internal control environment to improve accuracy and remove barriers to timely completion. Require a month-end, journal-entry checklist; implement journal-entry templates; verify report attributes; create and maintain standard operating procedures (SOPs); develop contingency plans; distribute escalation procedures; and maintain risk and control matrices.


 Organize your closing structure to be responsive to the needs of all entities and participants within the process. Encourage learning and share best practices; track key performance indicators (KPIs); track issues and solutions; and celebrate successes.


Kevin Kelso ( is a corporate finance consultant in Delaware.


To comment on this article or to suggest an idea for another article, contact Kim Nilsen, executive editor, at or 919-402-4048.





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