'''Financial close management'''<ref>{{cite news |newspaper=The Wall Street Journal |url=https://markets.on.nytimes.com/research/stocks/news/press_release.asp?docTag=201909170900PR_NEWS_USPRX____LA74034&feedID=600&press_symbol=89411 |title=Markets |date=September 17, 2019}}</ref> ('''FCM''')<ref>{{cite magazine |magazine=CFO Magazine |url=https://cdn.cfo.com/content/uploads/2012/08/Linking-Numbers-and-Narratives.pdf |title=LINKING NUMBERS AND NARRATIVES: Correlating Quantitative Reports with Qualitative Analysis |date=August 2012}}</ref> is a recurring process in management accounting by which accounting teams verify and adjust account balances at the end of a designated period<ref>{{cite news |newspaper=The Wall Street Journal |url=https://www.wsj.com/articles/technology-speeds-up-timeline-on-quarterly-close-1502708402 |title=Technology Speeds Up Timeline on Quarterly Close |quote=Tasks such as account reconciliation were previously left to the end of ... |date=August 14, 2017}}</ref> in order to produce financial reports representative of the company's true financial position<ref>{{cite web |website=SEC.gov |url=https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfinstmtguidehtm.html |title=Beginners' Guide to Financial Statement |date=February 5, 2007}}</ref> to inform stakeholders such as management, investors, lenders, and regulatory agencies. The process starts with recording transactions as journal entries and end with preparing the financial reports for the period.
==Overview== Closing the books involves consolidating transactions from multiple accounts, reconciling the information to ensure its validity, and identifying irregularities and errors that need to be adjusted.<ref>{{Cite web|url=https://www.accountingtoday.com/opinion/the-monthly-headache-how-close-management-software-can-help |title=How close management software can eliminate big headaches |website=Accounting Today |access-date=2018-12-21}}</ref><ref>{{Cite web |url=https://www.journalofaccountancy.com/issues/2011/dec/20114327.html |title=Building Blocks of a Successful Financial Close Process |date=2011-12-01 |website=Journal of Accountancy |access-date=2018-12-21}}</ref> Accountants typically perform the close process monthly or annually. In the end, the trial balance — the list of all accounts from the general ledger — must balance: The sum of all debts must equal the sum of all credits.<ref>{{Cite web |url=https://www.money-zine.com/definitions/investing-dictionary/financial-close |title=Financial Close|website=www.money-zine.com |access-date=2018-12-21}}</ref>
==Fluctuation analysis== In addition to reconciliations and adjustments, accounting teams track the health of the company by conducting fluctuation analysis (flux analysis).<ref>{{Cite web |url=https://www.corporateservices.noaa.gov/finance/docs/FinancialReportingFluxAnalysis_Updated.pdf |title=Financial Reporting Fluctuation ("Flux") Analysis |website=www.corporateservices.noaa.gov |access-date=2018-12-21 |publisher=US National Oceanic and Atmospheric Administration}}</ref> Flux analysis involves aggregating data from multiple periods and identifying material fluctuations from period to period, and what caused them. This helps businesses identify warning signs before they turn into major issues, though — given the labor-intensive nature of the month-end close — many businesses struggle to find the time and energy to conduct a thorough fluctuation analysis.
==Reporting== Businesses report differently based on their stakeholders and other interested parties.
For small businesses, reporting on a cash basis is considered adequate. For larger businesses, typically backed by investors, it is necessary to provide more in-depth reporting based on Generally Accepted Account Principles (GAAP) in the United States and International Financial Reporting Standards (IFRS) elsewhere.<ref>{{Cite web |url=https://www.accounting.com/resources/gaap |title=The Comprehensive Guide to Understanding GAAP |website=Accounting.com |access-date=2018-12-21}}</ref> These principles are a set of rules for accurate and consistent financial reporting and are mandatory for publicly traded companies.
== See also == * Accounting * Accounting software * Bookkeeping
==References== {{reflist}}
Category:Accounting Category:Administrative theory