Is Your Month-End Close a Fire Drill?
Here Are 8 Best Practices for a Faster, More Accurate Close
Month-end close can feel like a race against the clock. There are reconciliations to complete, journal entries to post, reports to review, and a seemingly endless list of details to tie out. When the process is not well structured, the pressure can quickly turn into long hours, rushed work, and avoidable errors.
A strong month-end close is built on preparation, consistency, accountability, and continuous improvement. The best processes reduce last-minute fire drills while giving leadership confidence in the numbers they are using to make decisions.
The objective is simple: close the books accurately, close them efficiently, and give your organization the information it needs to move forward.
Here are eight best practices to help make your month-end close more efficient.
1. Start with a detailed close calendar.
Create a detailed close calendar that outlines every task, deadline, and owner. Include recurring activities such as AP/AR cutoff, payroll, bank/account reconciliations, accruals, depreciation, intercompany entries, management review, and financial reporting, and make deadlines visible to everyone involved in the process, including departments outside of accounting.
2. Standardize the process.
Document recurring procedures and establish standardized checklists, templates, and review procedures. Where possible, use consistent naming conventions and documentation requirements for journal entries, reconciliations, and supporting schedules to create efficiencies.
3. Reconcile accounts throughout the month instead of waiting until the end.
Key balance sheet accounts should be reconciled regularly, particularly cash, accounts receivable, accounts payable, prepaid expenses, fixed assets, debt, and intercompany balances. Addressing discrepancies as they arise keeps problems from accumulating until close.
4. Automate what you can.
Recurring journal entries, account reconciliations, intercompany transactions, reporting, and data imports may offer opportunities for automation through your ERP/financial systems. Even simple improvements, such as standardized Excel templates or automated reminders, can save significant time over the course of a year, and give your team more time to review, analyze, and interpret data.
5. Establish clear review and approval procedures to ensure financial statements are complete and accurate.
Establish clear expectations for who prepares, reviews, and approves journal entries and account reconciliations. Review significant fluctuations and unusual transactions rather than simply checking that a reconciliation balances. A good review process asks, “Does this make sense?” rather than simply, “Does this tie?”
6. Track the close and measure what is slowing you down.
Track how many days it takes to close each month and identify where time is being spent to identify bottlenecks and make targeted improvements. Are reconciliations consistently late? Is the team waiting on information from other departments? Are journal entries being posted at the last minute? Are certain accounts generating recurring discrepancies?
7. Keep documentation audit-ready year-round to avoid the end-of-the-year scramble.
Maintain organized support for significant journal entries, reconciliations, estimates, contracts, and other material transactions. Make sure documentation explains the accounting conclusion and provides enough support for someone else to understand the activity.
8. Use the close to drive better business decisions.
Once the books are closed, finance leaders should be asking what the results mean. How did actual results compare to budget? Where were the largest variances? Are there changes in revenue, margins, expenses, working capital, or cash flow that require attention? Are there trends that should influence the forecast? The month-end close should ultimately produce more than a set of financial statements.
A strong month-end close is built on preparation, consistency, accountability, and continuous improvement. The best processes reduce last-minute fire drills while giving leadership confidence in the numbers they are using to make decisions.
The objective is simple: close the books accurately, close them efficiently, and give your organization the information it needs to move forward.
Here are eight best practices to help make your month-end close more efficient.
1. Start with a detailed close calendar.
Create a detailed close calendar that outlines every task, deadline, and owner. Include recurring activities such as AP/AR cutoff, payroll, bank/account reconciliations, accruals, depreciation, intercompany entries, management review, and financial reporting, and make deadlines visible to everyone involved in the process, including departments outside of accounting.
2. Standardize the process.
Document recurring procedures and establish standardized checklists, templates, and review procedures. Where possible, use consistent naming conventions and documentation requirements for journal entries, reconciliations, and supporting schedules to create efficiencies.
3. Reconcile accounts throughout the month instead of waiting until the end.
Key balance sheet accounts should be reconciled regularly, particularly cash, accounts receivable, accounts payable, prepaid expenses, fixed assets, debt, and intercompany balances. Addressing discrepancies as they arise keeps problems from accumulating until close.
4. Automate what you can.
Recurring journal entries, account reconciliations, intercompany transactions, reporting, and data imports may offer opportunities for automation through your ERP/financial systems. Even simple improvements, such as standardized Excel templates or automated reminders, can save significant time over the course of a year, and give your team more time to review, analyze, and interpret data.
5. Establish clear review and approval procedures to ensure financial statements are complete and accurate.
Establish clear expectations for who prepares, reviews, and approves journal entries and account reconciliations. Review significant fluctuations and unusual transactions rather than simply checking that a reconciliation balances. A good review process asks, “Does this make sense?” rather than simply, “Does this tie?”
6. Track the close and measure what is slowing you down.
Track how many days it takes to close each month and identify where time is being spent to identify bottlenecks and make targeted improvements. Are reconciliations consistently late? Is the team waiting on information from other departments? Are journal entries being posted at the last minute? Are certain accounts generating recurring discrepancies?
7. Keep documentation audit-ready year-round to avoid the end-of-the-year scramble.
Maintain organized support for significant journal entries, reconciliations, estimates, contracts, and other material transactions. Make sure documentation explains the accounting conclusion and provides enough support for someone else to understand the activity.
8. Use the close to drive better business decisions.
Once the books are closed, finance leaders should be asking what the results mean. How did actual results compare to budget? Where were the largest variances? Are there changes in revenue, margins, expenses, working capital, or cash flow that require attention? Are there trends that should influence the forecast? The month-end close should ultimately produce more than a set of financial statements.
Nicole DelToro has been helping organizations (big and small) hire and retain top talent for over 26 years, while helping individuals realize their personal and professional goals by ensuring they’re working in the environment that’s ideal for their current situation. Contact her at [email protected]
Andrews & Cole is a certified woman-owned boutique executive search and consulting firm with a focus on accounting and finance professionals. Clients range from start ups to Fortune 100 in nearly every industry.
Andrews & Cole is a certified woman-owned boutique executive search and consulting firm with a focus on accounting and finance professionals. Clients range from start ups to Fortune 100 in nearly every industry.
