Executive Summary
Efficient financial closing transforms a stressful reporting period into a strategic asset. To optimize for speed and accuracy, finance teams must master a structured 5-step workflow supported by rigorous governance and automation, which includes:
1. Closing Subsidiary Ledgers: Finalizing operational sub-ledgers (AR, AP, Inventory, Payroll) to create a stable foundation for the general ledger.
2. Executing Adjusting Entries: Recording non-cash items—including accruals, deferrals, and depreciation—to align with accrual accounting principles.
3. Performing Account Reconciliations: Validating GL balances against external statements and sub-ledgers to ensure data integrity and audit readiness.
4. Consolidating Financial Results: Aggregating data across entities, handling currency translation, and performing intercompany eliminations.
5. Generating Financial Statements: Producing the final balance sheet, income statement, and cash flow statement for stakeholder reporting.
For many finance teams, the financial close is one of the most stressful periods of the month. Manual reconciliations, disconnected spreadsheets, last-minute adjustments, and tight deadlines turn what should be a controlled process into a scramble.
Mastering the financial close requires two things: a clear understanding of the core sequential steps and the adoption of best practices that modernize how those steps are executed.
This article breaks down the five core steps of the financial close process and outlines proven financial close best practices that help organizations close faster, more accurately, and with greater confidence.
The Core 5-Step Financial Close Process
Every close follows a structured progression. Skipping steps or executing them out of order introduces risk, delays, and rework.
1. Closing subsidiary ledgers
The close begins outside the general ledger. Operational sub-ledgers (such as Accounts Receivable, Accounts Payable, Inventory, Fixed Assets, and Payroll) must be finalized before financial reporting can begin.
At this stage, finance teams ensure all period transactions are recorded, reviewed, and approved within their respective systems. A disciplined sub-ledger close sets the foundation for everything that follows.
2. Executing adjusting entries
Not all financial activity involves immediate cash movement. Adjusting entries ensure the financial statements reflect the true economic activity of the period, in line with accrual accounting principles.
This step focuses on non-cash items such as accrued expenses, accrued revenue, deferrals, prepaid expenses, depreciation, amortization, and provisions. Accuracy here is critical. Poorly documented or inconsistent adjustments can distort results, complicate audits, and undermine confidence in reported figures.
3. Performing account reconciliations
Reconciliation is the control point of the financial close. It’s where finance teams validate that general ledger balances align with supporting detail from sub-ledgers and external sources.
Bank accounts are matched to statements. Sub-ledger totals are compared to GL balances. Variances are investigated, explained, and corrected. Intercompany accounts are reconciled to ensure balances agree across entities before elimination.
This step is often the most time-consuming. Yet it’s also the most critical for ensuring accuracy, preventing misstatements, and maintaining audit readiness.
4. Consolidating financial results
Once individual entities are closed and reconciled, results are combined into a single enterprise view. Consolidation brings together financial data across subsidiaries, regions, and legal entities.
This process includes currency translation, intercompany eliminations, ownership calculations, and the treatment of minority interests where applicable. The goal is to present a unified, accurate picture of organizational performance, regardless of structural complexity.
5. Generating final financial statements
The final step of the close produces the official outputs: the Balance Sheet, Income Statement, and Cash Flow Statement.
These statements support internal management reporting, regulatory filings, investor communications, and audit reviews. At this stage, finance teams also perform variance analysis, validate results against expectations, and prepare explanations for stakeholders.
Best Practices for an Accelerated Financial Close
Understanding the steps is only the beginning. High-performing finance organizations apply disciplined best practices that transform the close from a reactive process into a controlled, predictable cycle.
Implement a strict, detailed close calendar
Speed starts with structure. A formal close calendar defines every task, dependency, deadline, and owner across the entire close process.
Many organizations aim for a “5-Day Close” or similar benchmark, but the real value lies in accountability. Each activity (from sub-ledger close to reconciliations and approvals) must have a non-negotiable due date. Visibility into progress helps teams identify bottlenecks early and keep the close on track.
Enhance internal controls and governance
A fast close is meaningless if it compromises control. Strong governance ensures accuracy, compliance, and auditability.
Best-in-class close processes enforce segregation of duties, standardized approval workflows, and comprehensive audit trails. Every adjustment, reconciliation, and sign-off should be documented and traceable. This diligence not only reduces fraud risk but also simplifies audits and regulatory reporting.
Standardise processes across entities
Inconsistent charts of accounts, reconciliation formats, and terminology create unnecessary complexity, especially in global organizations.
Standardization across entities improves comparability, reduces training time, and eliminates confusion during consolidation. When every region follows the same rules and structures, data flows more smoothly, and errors are easier to detect and resolve.
Leverage technology and automation
This is the game-changer for most finance teams. Manual, spreadsheet-driven closes simply don’t scale.
Automation reduces repetitive work, enforces consistency, and accelerates cycle times. Purpose-built financial close software enables automatic data loads, rule-based reconciliations, real-time validations, and controlled workflows. Moving away from spreadsheets brings speed, reliability, and resilience.
Shift focus from "recording" to "analysing"
The ultimate objective of an optimized close is impact.
When finance teams spend less time chasing data and fixing errors, they gain time to analyze results, explain performance drivers, and provide forward-looking insights. The close evolves from a reporting exercise into a strategic capability that supports better business decisions.
How OneStream’s Unified Platform Enables Close Best Practices
OneStream was built to address the exact challenges that slow down and complicate the financial close.
- Embedded account reconciliations automate matching, streamline variance analysis, and maintain a complete audit trail—reducing manual effort and human error.
- A unified platform brings financial consolidation, planning, reporting, and account reconciliation together in one system. This eliminates manual data movement, spreadsheet version control issues, and reconciliation gaps between tools.
- Financial sign-off and task management digitize the close calendar and enforce workflow discipline. Teams gain real-time visibility into progress, accelerating approvals and freeing time for higher-value analysis.
- Replacing scattered data and disconnected processes with a single source of truth, OneStream enables the speed, accuracy, and efficiency defined by modern close best practices.
Investing in financial close improvement isn’t just about shaving days off the calendar. It’s about building trust in the numbers, strengthening governance, and enabling finance to operate as a strategic partner to the business.
With the right process and unified technology, the close becomes a competitive advantage—not a recurring burden. Learn more about our Financial Close services here or request a demo of OneStream today.
