Closing with Confidence: Why the Financial Close Process Matters

Accurate financial reporting doesn’t happen by accident—it’s the result of a disciplined process known as the financial close. This behind-the-scenes workflow is what transforms raw data into reliable financial statements that investors, lenders, and leaders depend on to make critical decisions.

The close process involves more than just ticking boxes. Accountants must collaborate across departments, gather data quickly, reconcile accounts, post final adjustments, and thoroughly review entries. It’s a complex, high-stakes operation that ensures your numbers are not only complete but also credible.

Accounting Close

The accounting close process consists of the steps required to finalize the accounts at the end of an accounting period and prepare for the next one. This includes updating account balances, reviewing entries, and transferring temporary accounts—such as revenues and expenses—so that the general ledger is reset and ready for the upcoming period.

The process involves classifying and recording all business transactions that happen in the relevant period, reconciling all relevant accounts and generating a trial balance. From there, the accountant prepares the financial statements and gathers the necessary information to support required disclosures

Businesses with effective close processes don’t wait until year-end to finalize their books—they perform close activities throughout the year. These activities can generally be classified into monthly close and year-end close tasks

Monthly Close Activities

Monthly close activities are carried out at the end of each month to keep financial records current and accurate. These include:

  • Recording all transactions for the month—such as bills, expenses, and invoices
  • Applying the appropriate recognition and measurement criteria in accordance with the relevant IFRS standards
  • Reconciling key accounts including:
  • Bank Accounts.
  • Prepaid expenses.
  • Accrued expenses.
  • Depreciation.
  • Accounts receivable.
  • Accounts payable.
  • Fixed assets.
  • Loans.
  • Running the aged receivables report assessing collectability and determine the bad debt provision
  • Reviewing aged accounts payable and investigating overdue balances
  • Calculating depreciation for fixed assets
  • Listing and reconciling prepaid expenses against general ledger balances
  • Reviewing accruals and prepaid items to ensure accurate adjustments
  • Preparing a detailed list of taxes withheld and reconciling them to the general ledger
  • Reconciling VAT, WHT, levies, and other statutory liabilities to returns filed with the Ghana Revenue Authority
  • Ensuring all statutory filings are completed and submitted on time
  • Preparing and reviewing journal entries to reflect necessary adjustments

Year-end Close Activities

Year-end close activities are additional procedures performed at the end of the financial year to finalize the books and prepare the annual financial statements. These tasks ensure completeness, accuracy, and compliance with applicable financial reporting standards. Examples include:

  • Reviewing accounts receivable and estimating bad debt provisions. Obtain management approval where necessary.
  • Validating accruals to ensure they are still applicable and reconciling them to the general ledger.
  • Conducting a physical inventory count (if applicable), valuing inventory, and recording any necessary adjustments to reflect the accurate inventory value in the accounts.
  • Reviewing all general ledger accounts and writing off balances as approved by management.
  • Revisiting self-assessed tax returns, comparing them with projected profits or losses, and filing a revised return if necessary.
  • Preparing the financial statements after the books have been closed.

Closing with Technology

Modern cloud accounting software—such as Xero and QuickBooks Online—can significantly streamline the close process by providing key benefits including:

  • Automated journal postings, reconciliations, and ledger extraction, saving time and improving accuracy
  • Automatic rollover of balances into the next accounting period, ensuring continuity
  • Built-in reporting templates that are pre-populated with the necessary data to support the preparation of financial statements

By leveraging cloud-based accounting solutions, businesses can make their monthly and year-end close processes faster, more accurate, and less stressful.

Conclusion

The examples outlined above are not exhaustive. Every business is different, and the close process should be tailored to fit its specific operations and reporting requirements. Without a well-planned and controlled close process, there's a significant risk of issuing inaccurate financial statements which can mislead stakeholders and lead to compliance issues. Investing in a structured close process, supported by the right technology, is critical for maintaining financial accuracy and business credibility.

BDO has the expertise to help you develop an effective close process tailored to your business needs. Contact us today and let us build a financial close process that supports accuracy, compliance, and smarter decision-making.