Accounting closing: learn what it is and how to fulfill this obligation

The company’s accounting is an essential area of ​​the business, being responsible for monitoring, recording and classifying financial transactions. One of the main tools available for this sector is the accounting closing.

It is especially relevant because carrying it out is an obligation of every business, in addition to bringing benefits to business management. Therefore, it is worth understanding how the tool works and what steps to take to implement this routine.

Want to know more about accounting closing and how to use it? Keep reading and find out what are the essential points about it!

What is accounting close?

Accounting closing is a relevant step for the financial, tax and accounting situation of a company. It consists of an evaluation of all transactions carried out by the company in a given evaluation period.

In addition to recording and evaluating the information, the accounting close provides for the preparation of a report focused on data consolidation.

Regarding periodicity, it is possible to close monthly, quarterly, semi-annually or annually, for example. The frequency of preparation of this document, in general, varies with the volume of operations carried out by the company and the needs for monitoring data.

How does the accounting close of a company work?

Now that you know what the accounting close is, it’s time to understand how it works. The process begins with the collection of the data that will be used, such as information regarding the movements that have occurred.

From this, it is possible to understand what were the financial inflows and outflows, including compliance with fiscal and tax obligations. In this case, companies can use specific tools to carry out the procedure.

Through a platform or software, for example, it becomes easier to register, check and monitor financial, accounting and tax information.

Furthermore, it is interesting to know that accounting closing is related to financial statements and ancillary obligations to which companies are subject.

From it, the company can develop documents such as:

• balance sheet;
• income statement for the year ( DRE );
• cash flow statement ;
• other trial balances and ledgers.

Therefore, the operation of accounting closing does not only involve the preparation of the consolidated report. Instead, there are other steps that must be considered for fulfillment of obligations to occur.

In addition, accounting closure may lead to the need to use specific tools from supervisory bodies. Bookkeeping, for example, is done through the Public Digital Bookkeeping System (SPED), of the Federal Revenue Service.

What is the importance of carrying out this process?

As necessary as understanding how accounting close works is understanding what makes it relevant. As you have seen, it is an accounting obligation of companies and serves to provide information for financial statements and other tools.

In addition to these aspects, there are other elements that help to justify the importance of elaborating this closure.

Check out what they are!

Recognition of the financial and accounting situation of the company

With accounting closing, it is possible to have a broad and reliable view of the company’s financial and accounting issues. Thus, there is a way to identify which were the main movements, being able to classify them and understand what impacts they can cause.

In general, this is necessary to support the assessment of the company’s financial health. With the measure, it will be easier to understand what has worked best in the strategy and what results have been obtained.

Identification of financial problems or threats

Accounting close also supports the financial health of the business because it simplifies the identification of any threats or difficulties. As all data is consolidated, it is easier to check if the company is suffering from many chargebacks on its sales, for example.

In addition, it is simpler to recognize the presence of financial bottlenecks or other difficulties with the accounting part. From this identification, management will be able to act to prevent the consolidation of threats or to mitigate risks.

As a consequence, the accounting close helps the business to remain regular regarding its obligations and can make it more resilient in resource management.

Obtaining data to support decision-making

The accounting closing can also have a managerial support character. Through the report created in this process, the company’s team provides financial management with relevant data — from the history of transactions to projections in different scenarios.

With this, financial management becomes grounded and becomes more strategic. In the end, this can help the business consolidate and achieve goals, mainly due to better management of finances.

How to perform accounting closing in a business?

As you have seen, the accounting close is essential for the company to function — both to fulfill accounting obligations and to support management. Therefore, managers must know how to carry out this process efficiently.

The first step for this is to define the period of analysis of the information. As you have seen, the annual closing is mandatory, but the company does not need to limit itself to this deadline. There is also the possibility of carrying out monthly previews, for example.

Next, it is necessary to capture information regarding transactions, such as accounts payable and receivable. In this sense, both receipts from sales and expenses with fixed and variable expenses, including taxes and other obligations, must be considered.

To prepare the accounting closing, it is also essential that the information is accurate and reliable. Therefore, the ideal is to use strategic tools that help in data conference.