When Adjustments Signal Process Problems (Not Accounting Errors)

Adjustments are a normal part of the accounting close. Accruals, reclasses, eliminations, audit entries—every accounting team makes them. On the surface, they look like technical corrections: fixing timing issues, aligning classifications, or cleaning up balances.

But experienced accountants know something deeper is often happening.

When adjustments become frequent, large, or repetitive, they usually aren’t signaling accounting mistakes. They’re signaling process problems.

Understanding the difference can help teams fix the right issues—and dramatically improve the quality of the close.

Adjustments Are Symptoms, Not the Root Cause

In theory, adjustments correct small gaps between how transactions are recorded and how financial statements should reflect reality. In practice, many teams rely on adjustments to compensate for upstream weaknesses.

Common examples include:

• Monthly accruals that never stabilize

• Recurring reclasses that undo how transactions are posted

• Regular cleanups to fix timing mismatches

• Manual eliminations that correct inconsistent intercompany postings

None of these are accounting errors in the traditional sense. They’re process compensations.

The accounting is doing its job—patching over flaws in how data enters the system.

Red Flag #1: Recurring Adjustments That Never Go Away

One of the clearest signals of a process problem is an adjustment that appears every single period with little or no change.

These usually mean:

• Accrual processes aren’t standardized

• Operational systems aren’t feeding accounting consistently

• The chart of accounts no longer matches how the business operates

Instead of asking, “Is this adjustment correct?” the better question is,
“Why does this adjustment still exist?”

If an adjustment is permanent, the process upstream should be fixed.

Red Flag #2: Adjustments That Undo Normal Posting Behavior

When large reclass entries routinely reverse how transactions are recorded, it often means the GL configuration is misaligned with reality.

This typically points to:

• Poor account mapping

• Inadequate training for transactional users

• System limitations being worked around manually

In these cases, the adjustment is not a correction—it’s a workaround.

And workarounds don’t scale.

Red Flag #3: Adjustments Managed Only in Spreadsheets

When key adjustments live only in Excel, the risk isn’t just error—it’s loss of context.

Over time:

• Explanations disappear

• Ownership becomes unclear

• Review becomes harder

• Audit prep becomes reactive

The adjustment might be mathematically correct, but the process around it is fragile.

Strong processes preserve both numbers and reasoning.

Red Flag #4: Adjustments Concentrated at the Very End of Close

If most adjustments are made in the final hours or days of close, that usually means:

• Reconciliations are happening too late

• Issues are being discovered under time pressure

• Review is rushed

• Controls are reactive instead of preventive

Late adjustments aren’t inherently wrong—but they often reflect a close process that lacks early checkpoints.

Red Flag #5: Adjustments Only One Person Understands

Every team has them: entries that only one person can explain.

These are especially dangerous because:

• Knowledge is concentrated

• Reviews become superficial

• Turnover creates risk

• Problems get deferred indefinitely

When adjustments depend on tribal knowledge, the process is brittle—even if the accounting is sound.

Why This Matters for the Close Process

When teams treat adjustments only as technical corrections, they miss an opportunity.

Adjustments are some of the best diagnostic tools in accounting. They show:

• Where systems are misaligned

• Where processes are breaking down

• Where controls are too weak or too late

• Where complexity has outgrown the tools

In many cases, improving upstream processes can:

• Reduce the number of adjustments

• Shrink their size

• Make close faster

• Improve audit outcomes

• Increase confidence in financial statements

The goal is not zero adjustments.
The goal is intentional, explainable adjustments.

How TreeBeam Helps Surface Process Problems

TreeBeam was built to make adjustments visible—not just correct.

By providing a structured workspace for managing trial balances and adjustments, TreeBeam helps teams:

• Separate base balances from different types of adjustments

• Track adjustments by purpose and period

• Preserve explanations and context

• Compare adjustments period over period

• Identify recurring patterns early

When adjustments are organized clearly, patterns emerge quickly. And when patterns emerge, process problems become easier to fix.

Instead of reacting to the same adjustments every month, teams can finally ask the right question:

“Should this adjustment still exist at all?”

The Bottom Line

Not all adjustments are bad.

But when adjustments become large, frequent, or permanent, they’re rarely signaling accounting errors. They’re signaling process weaknesses.

The best accounting teams don’t just fix the numbers.
They fix the systems that create the numbers.

When adjustments start telling a story, it’s worth listening. Close with confidence - TreeBeam has you covered! Visit us today - https://www.treebeam.com or https://portal.treebeam.com.