What is Entity Level Approval?
Definition
Entity Level Approval is the formal authorization of finance transactions, balances, reports, adjustments, or controls at the legal entity, business unit, subsidiary, or regional entity level. It ensures that financial activities are reviewed by the right entity owner before they move into group reporting, consolidation, payment, close, or management review.
How It Works
Entity Level Approval starts when an item is prepared for a specific entity. The approval route is based on entity code, country, ledger, cost center, transaction value, account type, and reporting impact. The entity controller, finance manager, tax reviewer, treasury owner, or local business approver then reviews the item before it is finalized.
For example, a journal entry for a subsidiary may need entity controller approval before it flows into Entity-Level Reporting and group consolidation. Larger approvals may also follow a Multi-Level Approval Workflow when local, regional, and corporate finance teams are involved.
Core Components
Entity-based approval rules for journals, payments, reconciliations, reports, and adjustments.
Role mapping for preparers, reviewers, controllers, and final approvers.
Approval thresholds by value, account, ledger, country, and risk level.
Evidence such as schedules, variance commentary, invoices, and reconciliation support.
Control alignment with Segregation of Duties (Multi-Entity).
Role in Financial Close
Entity Level Approval is important during month-end and quarter-end close because each entity must confirm that its books are complete, accurate, and ready for consolidation. This includes approval of Entity-Level Reconciliation, journal postings, intercompany balances, accruals, prepaid expenses, tax entries, and management adjustments.
It also supports Entity-Level Chart Mapping by ensuring local accounts are mapped correctly to the group chart of accounts before group reporting begins.
Business Use Cases
Entity Level Approval is used for local ledger close, statutory reporting, intercompany settlement, payment release, tax review, local GAAP adjustments, and entity-level variance explanations. It helps corporate finance understand whether each subsidiary has completed its responsibilities before the group close is signed off.
Key Metrics
Useful metrics include entity approval completion rate, overdue approvals, average approval time, rejected submissions, reopened entity packs, and approval aging by region. These metrics help finance leaders monitor whether entity-level responsibilities are completed on schedule.
For example, if 60 entities must approve their close packs and 54 complete approval before the deadline, the completion rate is 90%. If the remaining 6 include material revenue, debt, or tax balances, group finance may prioritize those approvals before final reporting release.
Control and Governance
Entity Level Approval strengthens accountability because each entity signs off its own numbers, evidence, and local compliance position. It also supports Service Level Agreement (SLA) monitoring when shared service teams prepare entity data and local finance teams approve it.
Where finance activities are split between shared services and retained finance, an Operational Level Agreement (OLA) can define handoffs, review timelines, and approval responsibilities. Implementation teams may also define these rules in a Service Level Agreement (Implementation) during rollout.
Summary
Entity Level Approval ensures that finance items are reviewed and authorized by the correct entity owner before they affect consolidation, reporting, payments, or close sign-off. It improves financial reporting quality, operational efficiency, cash flow control, and accountability across multi-entity finance operations.
