The Dreaded Month-End Close: How to Do it Quickly, Efficiently, & Painlessly

month end closing process

Unfortunately, this process is time consuming and error prone, so finding an automated solution is essential. There is little doubt that month close is a significant activity in the finance function which requires the month end closing process books to be closed quickly and accurately. Needless to say that forecasting cash flow predictions accurately, making strategic business decisions, and financial planning, all depend on a successful financial closure.

month end closing process

Month-End Closing: A Critical Process for Accountants

It’s difficult for small business owners to keep track of all of their company’s financial data. You’re trying to stay on top of balance sheet accounts while tracking accounts payable, savings accounts, and so much more. The month end closing process is a procedure that accounts for all of the previous month’s financial transactions. Your accounting team reviews, records, and reconciles all relevant account information. Finally, it’s time to think ahead to the month in hand and create a business financial plan to address key risks. If something was particularly manual this month, for example, it might be time to think about creating an automation process.

How Long Does It Take to Perform Month-End Close?

The process involves reviewing, documenting, and reconciling all financial transactions for that period. Ultimately, the goal of your finance and accounting teams is to create accurate financial statements for the month. The month-end close process can vary depending on the nature and size of the business. The complexity of the process may differ for smaller companies with fewer accounts compared to larger multinational corporations dealing with numerous accounts and complex financial structures. Financial statements, including the income statement, balance sheet, and cash flow statement, are prepared based on the recorded transactions. These statements provide a comprehensive overview of the company’s financial performance and position during the month.

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The big picture takeaway here is that the closing process costs you valuable time and energy which would be better spent on strategic decision making. You have the power to create better workplace satisfaction, create savings and turn a higher profit. But communicating cut-offs gives them enough time to attend to tasks like paying your invoice while also completing the month end close. Occurrences like this could double the entire month-end process and will surely have a knock-on effect to other accounting processes.

Month End Close Process Flowchart: Complete Guide

Verify the accuracy of accrued expenses or pre-paid expenses and accounts payable balance above. Adjustments may be necessary to reflect the correct financial position. What we’ve discussed here is probably a significant change to your monthly closing procedures.

Set a Reasonable Timeframe for Completing the Close

The critical path is the sequence of tasks and activities you must complete on time for what you define as a successful close for your company. By identifying this path, you can focus your efforts on the most essential activities and ensure you complete them efficiently. Once you have your target date, develop a timeline with progress touchstones to help you track your way. This means assessing the current state of your close process and identifying any gaps or bottlenecks you must address to reach your ideal future state.

Mastering the Month-End Close Process in 7 Steps

month end closing process

The period is then marked as closed to prevent any further transactions from being recorded for that month. Invest in cutting-edge accounting software to automate routine tasks such as data entry, journal entries, and the preparation of financial statements. This integration of accounting software accelerates the processing of financial information, improving the accuracy of tax filing data. If multiple teams are involved in the monthly closing process, then keeping track of the status of tasks is going to be a significant pain point. HighRadius’ Autonomous Accounting Solution gives real-time visibility into the different financial tasks and ensures activities that involve multiple stakeholders don’t get slowed down.

Streamline your month-end close process with this expert-built checklist

In the end, rather than reacting to the close cycle, you’re proactively planning for it, executing it promptly, and effectively managing exceptions rather than just surviving the monthly closing process. Closing procedures at the end of the month typically take about eight days in a high-growth B2B SaaS company but can take as little as five days in a small business. But the shorter you can make your timeline, regardless of business size, the better. The workflow should cover the entire process, from ensuring customer payments before the closing date to flux analysis and delivery.

In simple terms, the month-end close involves reconciling accounts, verifying transactions, and preparing financial statements to accurately show the company’s financial status at the end of the month. To do this, the finance and accounting team reviews and adjusts journal entries, reconciles bank statements and accounts, analyzes variances, and ensures compliance with regulatory requirements. Reviewing and reconciling balance sheet accounts ensures that all transactions have been recorded and accounted for. Reconciliation includes bank statements, charge accounts, accounts payable and receivable, fixed assets, deferred revenue accounts, and inventory. This step is important for the accuracy and completeness of the financial statements.

Closing faster sometimes means a tradeoff between speed and accuracy. Using estimates rather than exact calculations can shave hours or even days off the close. In many cases, those estimates are not materially different from the actuals. However, when it’s time to close the fiscal year, the actuals will need to be determined. That means that the year-end close will likely take at least an extra day or two.