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STANDARD CLOSE PROCESS DEFINITION
& PRACTICES
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Standard Close Process Definition& Practices
Process Owner:
The owner of the site close process is the site controller.
Process Scope:
 The site close process starts with systems cut-off and ends with system transmission to corporate consolidations and the
generation of standard financial reports.
 Based on our review of various site close processes, we have compiled and are recommending the following high level
standard practices:
Standard Practices:
 Every site should develop a calendar for the year with all major close related dates identified. This should be supported
with details about feeder cutoff dates and interfaces, and a detailed listing of activities and responsibilities.
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 All companies should accelerate their efforts to implement global integrated systems that capture data at source
accurately. These systems validate financial data elements related to operational events against a centralized database
containing all possible valid values and rules. With these systems in place, error corrections and rework during the close
cycle resulting from invalid elements and code combinations will be minimized.
 Materiality limits need to be established for accruals and error corrections. These limits should be defined within the
standard processes for finance. Any accruals or error corrections under $5,000 should be deferred to the following month.
 As a practice processes and checks should be put in place to ensure that not more than 2 days elapse between the
occurrence of an economic event and the capture of the financial information relating to that event.
 Routine transaction-based feeder systems like accounts payable, accounts receivable, billing, inventory etc should be
posted to the G/L daily/weekly.
 Intercompany invoices and charges should be processed daily. As a practice, all intercompany charges should be sent by
the accounting month-end (AME). Most companies need to address & correct the issue of having a majority of
intercompany transactions occurring at the end of the month,
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
Payroll should be processed monthly or bi-weekly (depending on local customs). If any payroll payment for the month is
scheduled to fall outside of the accounting month-end, an accrual should be made for this final payroll entry based on the
last payroll journal entry.

T&E should be booked daily if processed through A/P or monthly/bi- weekly if processed through payroll. T&E guidelines
for punctual submission of expense statements should be communicated to all functional areas of your company and
should be strictly adhered to.

Maintenance contract billings should be run and posted two days before the accounting month-end. The deferred revenue
related to these billings and the recurring entries from prior on-going contracts should be booked one day before the AME.

Fixed Asset (F/A) in-process accounting should be tracked and posted daily/weekly in concert with the A/P postings and
intercompany transacting. The final week's in-process transactions should be completed two days before AME. As much
of the final week's A/P invoices as possible should be reviewed for inclusion in the current month's F/A additions entry.
The remainder of the F/A related A/P invoices should be left in the in-process account and actioned the following month.

F/A additions, deletions, transfers, etc transactions should be done during the month as these events occur. The posting
of F/A transactions and the calculation and posting of depreciation should be done before the AME.
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
AII routine reversals, recurring accruals, recurring allocations; allocations, based on standard or plan rates and other
recurring entries should be booked six days before the AME.

Sites should conduct business units (BU) reviews with functional managers four days before the AME. This meeting
should be used to appraise the BU managers of potential revenue misses, and potential cost/expense overages or underspending as compared to the outlook/forecast.

AII sub-Iedger to G/L high level reconciliations should be done at the time of postings. This high level reconciliation
Should be a cursor check to ensure that the sub-Iedger materially ties to the GL balance.

AII detailed reconciliations should be done immediately following the close cycle and completed within three weeks of the
AME.

AII sites should hold a post-close meeting to discuss risk items for the following month based on reconciliations, meetings
with functional departments. The prior month close process should be discussed to identify roadblocks and to identify and
resolve the root causes of errors. Errors should be classified (adjustments, reclassifications, rework, etc) and tracked to
determine frequency, recurrence and to identify improvement opportunities.
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Standard Close Process Description:
The process begins with: Systems cutoff and accounting month-end on the last Friday of the month.
Suppliers to the process are: General Accounting Payroll, Accounts Payable, Travel & Entertainment, Fixed Assets,
Customer Service Accounting, Intercompany Accounting, and Revenue Accounting.
Inputs to the process are: Timely accurate; and error free journals from Payroll, Travel & Entertainment, Fixed Assets,
Accounts Payable, Customer Service, Revenue and Intercompany Accounting.
The Process ends with: The system files transmitted to corporate consolidations and financial standard management reports
generated.
Outputs of the process activities are: Timely accurate and error free journals, non-GL items, financial statements, and
system file.
Customers of the process activities are : General Accounting Controller Planning Manager, Industry/BU Managers and
Corporate Consolidations.
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STANDARD CLOSE PROCESS BLOCK DIAGRAM
Supplier
Input
Owner : Site Controller /Finance
Payroll Dept.
Payroll , A/P Dept
Finance Dept.
Payroll Exp. & Liabilities
T&E Exp. &Liabilities
Finance & Deprec.
Exp.
Maint Revenue
Payables
Exp.
Inventory & order system
Revenue & A/R
InterCo Chgs
Posted prior to AME
Only week 4 activity posted on AME
Posted prior to AME
CS Acctg.
A/P
Revenue Acctg
Revenue Acctg
InterCo Acctg
Revenue Acctg
Accounting
Reports
Reserves,
Provisions &
Releases
Manual JEs
Allocations
Adjustments
Posted prior to AME
Only week 4 activity posted on AME
1
AME
Consolidation Data
Accounting
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Customer
Journal Entries
Accounting
Journal Entries
Allocations
Manual JE s
Accounting
Only week 4 activity posted on AME
Only week 4 activity posted on AME
Only Friday AME
Posted. Remainder
accrued to the forced
record acct
3
AME + 2 WD
2
AME + 2WD
4
AME + 3WD
5
AME + 3WD
Accounting
Accounting
Output
P&L Balance
Sheet, non-GL
Items
6
AME + 4WD
System File
7
AME + 5WD
Standard
Financial
reports
Controller
Planning
Mgr
Corporate
Consolidati
ons
Industry /
BU
Managers
Activities :
1. Systems cutoff.
2. Finalize Revenue and
order system
3. Finalize other cost of
revenue, marketing,
selling G&A& R&D
4. GL translation and
business review
5. Finalize non-GL
reporting elements
6. Load data into system,
validate and transmit
7. Print standard
financial reports
Legend
AME – Acctg month end
WD – Work days
7
Close Calendar
Sunday
Monday
Tuesday
Wednesday
Thursday
1
4
5
6
7
11
12
13
14
18
19
20
21
Maint Billings, F/A inprocess postings
25
26
InterCo cut-off, 27 Force record InterCo
post system
chgs received Friday,
entries, print
correcting entries,
reports, high
reserves, provisions,
level recon,
releases, allocations,
adjusting
translation
entries
Finalize Rev, Costs, and Expense
2
3 Reconciliations
28
Cursory Business
Review, adjusting
entries, reallocate,
DOH, DRO rec,
aging, inventory
aging etc., extract
system file
1
Business review
Assumptions :
Payroll is processed monthly
T& E statements are processed through A/P
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Friday
Saturday
2
Week 1 A/P , Inventory,
3
Billings, A/R , T&E and FIN
in-process Posting
8
9 Week 2 A/P , Inventory,
10
Billings, A/R , T&E and FIN
in-process Posting
15
17
Routine reversals, 16 Week 3 A/P , Inventory,
recurring accruals,
Billings, A/R , T&E and
recurring alloc,
FIN in-process Posting
alloc based on std
or plan rates etc,
22 Deferred Rev. ,
23 AME and Systems cut-off
24
F/A journal entries
Week 4 A/P , Inventory,
Billings, A/R , T&E and
FIN in-process Posting,
Final InterCo charges
processed
29
Load System File,
Enter Non G/L
information,
Check
Validations,
Check for
5
30
Print BU reports,
Management reports, &
other Std Financial Rpts.
31
6
Post Close meeting
7
Depicts the close cycle
8
Conclusion
Companies need to rigorously follow up the close cycle with formal
reconciliations and with a post close meeting. During this meeting, companies
should review risks and issues raised as a result of the reconciliations and
should identify actions required to alleviate these risks. This forum should also
be used to discuss the error log. Reviews of prior error logs should be done to
track successes and to ensure that the same errors are not recurring. Root
causes need to be identified by process owners, and actions and timeframes
determined to resolve all errors. Companies should strive to minimize nonvalue added activities like reviews, inspection, checks, error correction,
duplication of tasks, etc. within the close process .
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