SAP FICO Financial closing made easy: practical tips for accurate and fast closing

Introduction :-

Financial close or “Closing the Books” is a recurring accounting process usually done at the end of the Month, Quarter or Year where a company’s financial records are verified, reconciled and adjusted to ensure the accuracy and reliability of financial statement & must follow accounting rules.

Today’s business environment is extremely fast-paced. Therefore, there is an increasing need to optimize financial closing processes. In such a scenario, SAP FICO plays and crucial role in managing the financial data of an organisation and its closing process. With the best practices and effective strategies, SAP FICO enables to achieve better decision making.

Often, Companies face challenges while financial closing with manual process in place, there are bound to be many errors and delays. Moreover, all these inefficiencies could impact the regular proceedings and operations of the business.

With SAP FICO, companies can avail of multiple features that can eliminates the inefficiencies encountered in the manual process. Its tools, automation, & functionalities can immensely benefit companies.

The financial closing process in SAP FICO is all about task perform at the conclusion of a particular financial period Includes mainly:

• Perform Bank Reconciliation.
• Reconcile Vendor & Customer accounts.
• Reconcile sub ledgers with general ledgers.
• Clear Open Items (Pending Invoices bookings/payments).
• Run Asset Depreciation.
• Post accruals & deferrals (adjustment entries).
• Carry forward general ledger balances (year end).
• Close the Posting period in SAP.
• Generate Financial statements (Balance sheet and Income statement).

In SAP Fico closing activities divided into Preclosing, Core Closing & Post Closing :-

1.PRE-Closing Activities (Preparation State): - These tasks prepare the books before final adjustment

• Post all Vendors/Customer invoices.
• Clear Incoming & Outgoing Payment.
• Complete GR/IR clearing (Goods receives and Invoice receives).
• Complete and process any parked or held accounting documents.
• Ensure that the sum of Intercompany balances is zero.
• Cleared all suspense accounts to correct postings.
• Reconcile sub ledgers (AP, AR, Bank) with GL.
• Correct data errors & mismatches.
• Ensure all transactions for the period are entered.

CORE Period Closing Activities (Key Accounting Adjustment)

• Post accruals and deferrals (expenses /revenue adjustments).
• Post Provisions (estimated liabilities).
• Run Depreciation for fixed assets.
• Perform Foreign currency revaluation.
• Perform cost allocations/settlements.
• Revalue & Adjust inventory.
• Validate Trial balance & correct discrepancies.

POST-Closing Activities (Finalization & Reporting): After adjustments, close & report the period

• Perform balance carry forward (Year end only).
• Close Posting period in SAP (OB52).
• Generate financial statements Balance sheet & Income statement.
• Review & approve reports.
• Share reports with management & auditors.
• Prepare books for next period.

List of T-Codes with in tabular form for quick reference :-

The SAP Fico closing process is a structure sequences of tasks, guarantees the accuracy in financial reporting such as Balance sheet and Profit & Loss statement & also enables transparency, audit readiness, and smooth transition into the next Fiscal Period.
Overall, SAP FICO closing plays a crucial role in reliable financial reporting, decision making & regulatory compliances.