Close software organises the work of turning a month of transactions into a set of books someone can sign. It holds the close checklist, the account reconciliations, the journal entries that adjust the ledger, and, for groups with more than one legal entity, the consolidation that produces one set of statements from many.
What it does
The general ledger records transactions; it does not tell a controller whether the cash account agrees with the bank, whether an accrual was booked, or which of forty tasks is late. Close software sits beside the ledger and answers those questions. A reconciliation module pulls balances from the ledger and compares them with bank statements, sub-ledgers or schedules, and keeps the support attached. A task module lists every step of the close with an owner, a due date and a reviewer. A journal module drafts and routes entries for approval before they post. Consolidation adds currency translation, intercompany eliminations and the roll-up of subsidiaries into a group.
For listed companies the close feeds the controls that management reports on. The SEC's rules on management's report on internal control over financial reporting and certification of disclosure are one reason sign-offs and evidence are kept inside the tool rather than in email.
Who uses it
Controllers and assistant controllers run it. Staff and senior accountants prepare reconciliations and entries in it. Internal audit and external auditors read from it. Shared service centres use it to standardise the close across entities.
The parts a typical product has
- A close checklist or task manager, with dependencies and sign-offs
- Account reconciliation, with templates, thresholds and attached support
- Transaction matching for high-volume accounts such as cash and clearing accounts
- Journal entry preparation, approval and posting back to the ledger
- Flux or variance analysis between periods
- Consolidation: currency translation, eliminations, ownership and group reporting
Where it meets other categories
The close reads from the ERP and general ledger and writes adjusting entries back to it. Its output feeds financial reporting and disclosure management and the board pack that FP&A prepares. Reconciliations of cash depend on bank data that treasury systems also collect. The evidence it keeps is what audit and SOX compliance tools test. Group consolidation follows the accounting standards on control and currency, such as IFRS 10 and IAS 21.
Questions to ask a vendor
- Which ledgers do you connect to natively, and is the connection read-only or does it post entries back?
- How are reconciliation thresholds and review levels configured, and who can change them?
- What does an auditor see, and can they be given read-only access?
- How do you handle intercompany balances that do not agree?
- If consolidation is included, how are currency translation and partial ownership handled?
- What does a typical implementation take, and who does it?