Financial modelling terms explained

Financial Close

Financial close is the process of reviewing, completing, and approving a business's financial statements to ensure they are accurate and reflect the company's financial condition.

What Is Financial Close?

Financial close is the point in time when a company has completed all the financial transactions necessary to formally record all the results of its operations for a given fiscal period. This includes the issuance and sale of all stocks, bonds, and other securities, the receipt of all payments for goods and services, and the finalization of all financial contracts. Once financial close has been reached, the company's books are said to be "closed" and it can issue its financial statements for the period.

What Is the Process of Financial Close?

The process of financial close is the process of officially completing the financial transactions between a company and its lenders and investors. This process usually takes place after the company has completed its financial statement audits, and all of the required financial information is finalized. The process of financial close typically includes the following steps:

1. Finalizing the financial statements - The company's financial statements must be finalized and approved by the company's board of directors.

2. Securing lender and investor approvals - The company must secure the approval of its lenders and investors for the financial statements and the terms of the financial transactions.

3. Executing the financial transactions - The company must execute the financial transactions with its lenders and investors.

4. Closing the books - The company must close its books and finalize all of the financial transactions.

What Are the Steps Involved in Financial Close?

The steps involved in financial close are as follows:1. Preparation of final financial statements2. Review of financial statements by auditors3. Preparation and submission of audited financial statements to the relevant authorities4. Receipt of regulatory approvals5. Finalization of accounting and financial records6. Payment of taxes and other statutory dues7. Distribution of profits (or losses) to shareholders

Who Is Involved in Financial Close?

Financial close is a process that is typically carried out by the finance department of a company. The finance department is responsible for ensuring that all of the financial records of the company are up to date and that the company is in compliance with all financial regulations. In order to close the books on a fiscal quarter or year, the finance department must collect and compile all of the financial data from various departments within the company. This data is then analysed to ensure that the company is in compliance with financial regulations and that all financial statements are accurate. Once the financial data has been analysed, the finance department will prepare and submit all of the financial reports to the company's board of directors. The board of directors will then review the financial reports and make any necessary changes. Once the board of directors has approved the financial reports, the company is considered to be in financial close.

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