How to Speed Up the Month-End Close Process: Best Practices & Tips

It can be tempting to wait until the end of the year to gather, reconcile, and record all the information a small business needs to prepare its annual financial statements. But waiting until year-end to close the books creates unnecessary risk and complexity. Monthly closes are crucial because they provide business leaders with timely, accurate financial data for informed decision-making throughout the year, help to identify potential issues before they become serious problems, and simplify the year-end close. At the same time, though, monthly closings can be time-consuming and labor-intensive.

This article explores proven ways to accelerate and improve the month-end close process, helping finance teams work more efficiently and deliver better business insights.

What Is a Month’s End Close?

The month-end close is a critical accounting process in which a business reviews, records, and reconciles all its financial transactions from the previous month. It can take anywhere from a day or two to two weeks, and usually occurs during the last few days of the month in question and the first few days of the next.

The main purpose of a month-end close is to prepare necessary financial statements and protect the business from financial risks, but monthly closes also provide business leaders with more timely visibility into financial performance. Reviewing statements on a monthly frequency helps them monitor key performance indicators (KPIs), track progress toward strategic goals, and identify areas for improvement. The data also informs other financial activities, such as cash flow management, accounts payable and receivable, and capital funding.

Common closing practices include gathering bank and loan statements, recording unentered invoices—from both accounts payable and accounts receivable—reconciling accounts, counting inventory, tracking fixed assets, and preparing financial reports. Specific requirements vary with business size, industry, complexity, and accounting basis (cash or accrual).

The speed and effectiveness of a company’s monthly close is considered an indicator of how well its finance function is managed. Modern accounting systems can use software powered by artificial intelligence (AI) algorithms to automate many closing tasks, thereby accelerating the entire process.

Key Takeaways

• A month-end close is the process by which a business accounts for the previous month’s transactions.
• It is the foundation for financial reporting and paves the way for a streamlined end-of-year close.
• For many companies, though, the month-end close can be laborious and slow.
• By investing in best practices, technology, and automation, companies can improve the monthly close process and henceforth make better and more timely business decisions.

Why Is the Month-End Close Process Important?

The month-end close provides a foundation for accurate financial reporting and informed decision-making. The data it produces feeds financial statements, executive-level decision-making, board discussions, and lender determinations. Monthly closings also help businesses screen out financial inconsistencies or fraud earlier than they otherwise might.

Some common and compelling benefits of a monthly close include:

• More accurate recordkeeping: Closing the books monthly helps guarantee that a company’s financial records are always up to date and accurate. In the absence of this monthly effort, errors, mistakes, or oversights can accrue over time, clouding clarity into business finances. Accurate and timely financial records makes it easier to access funding, too, because banks and investors usually require organized, clear financial data. It also provides better visibility into a business’s cash flow and liquidity.
• Reduced risk: Monthly reconciliation helps finance teams identify and correct minor issues before they become full-blown catastrophes. Regular reviews can flag unusual transactions that might indicate fraud or misappropriation of funds. The steady frequency also ensures timely correction of discrepancies between accounts, supporting better cash flow management and sounder decision-making. Plus, it is far easier for accounting teams to handle 30 days of financial data without mistakes than it is to handle 90 days or more.
• Simplified audits: Performing a monthly close process creates a consistent and accurate digital trail of business transactions, rendering audit preparation much more straightforward. What’s more, a strong and effective monthly close, during which data is reviewed, reconciled, and accurately reported, increases the likelihood of successful audits and minimizes the tedious back-and-forth sessions with auditors. Closing the books monthly also simplifies tax filing. It’s worth noting that more straightforward audits and tax filings usually also means lower external audit and accounting fees.
• Help with measuring progress: Monthly closes provide regular and timely peeks into the company’s financial position, enabling leaders in finance and elsewhere to assess progress toward business goals, track KPIs, and identify areas for improvement. The monthly information flow supports short-term decision-making, long-term forecasting, and strategic planning. It allows a business to tag performance trends throughout the year, instead of only at year-end.

Challenges to the Month-End Close Process

There’s a reason many finance organizations dread the monthly closing of the books: It can be an overwhelming and unwieldy process requiring information from all corners of the organization. Particularly in companies that have not centralized their financial data, finance professionals can face a morass of incomplete or inaccurate information, missed deadlines, incorrect assumptions, and unnecessary rework.

Some of the most common and impactful issues that finance teams may encounter in closing the books each month include:

• Lack of standardization: One of the most cumbersome tasks during a month-end close is the reconciliation of transactions and accounts. Without consistent practices for handling enterprise data, discrepancies can accumulate over time, forcing the finance team to deal with them in the midst of its closing effort, which drags it out. The team must spend additional time researching and reconciling data during the closing process, creating unnecessary delays and frustration.
• Manual data entry errors: Unfortunately, many organizations still have pockets of manual processes and siloed data, which magnifies the likelihood of errors and inconsistencies cropping up to compromise data integrity and make it impossible to guarantee accurate financial statements. Investing in enterprise accounting systems and automating as much data entry and collection as possible increases the efficiency of the close process—not to mention the accuracy of the financial reports that emerge from it.
• Disorganized approach: An ad hoc approach to the month-end close can set the stage for incomplete data, missed steps, and poor coordination among the participating departments. That can lead to reporting gaps, increased errors, duplicated efforts, and missed deadlines. Developing standardized practices and checklists requires initial setup time but pays off through reduced errors and streamlined workflows. It allows the finance team to proceed with a well-understood workflow that runs much more efficiently. For example, if there is a well-defined process for approving expenses, the finance team will not have to chase down people to ensure that each line item gets approved.
• Missing or delayed receipts: Having toferret out missing receipts and determine the purpose of various expenditures delays the closing process. Teams must reconcile petty cash funds, deposits, and receipts to ensure that every entry is recorded appropriately.
• Outdated software: Legacy software or siloed systems can impose a significant drag on accounting teams, which will be forced to manually reenter information—a process that is labor-intensive and error-prone.
• Inaccurate forecasting: Many of the challenges above can lead to more than just difficulties closing the books and issuing financial reports. They can compromise data integrity, resulting in forecasting inaccuracies that negatively affect company decision-making, financial health, and stability.

9 Best Practices for a Smoother Month-End Close

Only about half of responding companies (53%) were able to complete their monthly closing in six days or less, according to a 2022 survey by Ventana Research. But Ventana believes that even that percentage is overstated—some organizations routinely handle material matters that require accounting adjustments only after they “close,” so they can say they meet the one-week benchmark. Accelerating the month-end close process is a key goal for many businesses, but it’s important that faster speed does not come at the expense of accuracy and compliance.

There are some important practices that finance and accounting teams can put in place that are likely to result in a faster and more effective month-end close process. They may require significant changes in the way things are done, depending on an organization’s current status quo, but they can offer essential benefits.

1. Assess the Current Process

Companies seeking a faster, smoother end-of-month close will want to review their current process to pinpoint areas of low productivity, areas in need of greater organization, and opportunities where they might rethink workflows and workloads. Thus, a logical first step is to look at all the tasks required to close the books each month and their interdependencies, with an eye toward any bottlenecks that can be eased. Most organizations, for example, have a standard purchase order (PO) process that includes rules about who can issue POs, at what threshold amounts, and how to match invoices with POs to simplify expense reporting and accruals during the close. And in many of those companies, managers don’t adhere to the PO process, generating a lot of extra work for the accounting team. Taking the time to assess the current state of affairs is meant to reveal trouble spots like that, where time or resources are being wasted, and to identify those tasks that might be ripe for automation.

2. Organize Data in Advance

Waiting until the start of the month-close process to gather necessary data is sure to extend the work much longer than is necessary. Instead, it’s important to organize that information before it’s time to start the process, making sure that accounting teams have access to the most recent accurate data to complete financial reports. This data is likely to include bank statements, journal entries, vendor invoices and payments, general ledger accounts, and receipts. Data may also include information related to fixed assets, new and existing liabilities (such as leases and mortgages), office or plant equipment, hardware and software, and office equipment or furniture. The “blueprint” for organizing all this data is a standardized chart of accounts that is structured to reflect the way a company does business.

3. Keep Good Records

Maintaining accurate and up-to-date records is essential to a more efficient month-end closing process. Keeping good records of accounts payable and receivable, payroll, travel, and other expenses reduces the amount of extra work needed at the end of the month to verify the accuracy of expenses and reconcile accounts. It’s also a good practice to check on these records during the month to ascertain that they are correct, making sure that debit and credit entries are posted appropriately to the general ledger, eliminating duplicate or miscoded invoices, and reviewing the accounts receivable collections accounts to verify that customers are paying according to established terms, for example. In fact, some companies conduct a “soft close” at mid-month in hopes of identifying holes early and to spread out the closing workload.

4. Adopt a Checklist

There’s no need to reinvent the wheel every time you close the books—it wastes time and adds unnecessary stress. Creating a clear and well-documented month-end process goes a long way toward forming a fast and efficient closing effort. Start by developing a repeatable workflow that assigns a series of steps and tasks to specific individuals, thus setting expectations for everyone’s role and creating clarity for when crunch time comes. Then, use that information to create a month-end closing checklist to help keep the team aware of the information needed and the tasks to be accomplished. Documenting the steps and checklist also means the work can get done even if one of the team members is on vacation or ill. It’s also important to cover possible contingencies and how to address them. In addition to articulating what needs to be done and by whom, the process of creating a checklist can reveal aspects of the process that could be improved or eliminated—or even accomplished at other times (say, daily or weekly) to streamline the month-end work.

5. Reconcile ASAP

Performing account reconciliations promptly will help identify errors and prevent any discrepancies from causing more significant issues later. When bank statements become available, for example, the team should check that the balances match those recorded in the general ledger. The same should be done for other financial information as well, such as reconciling deposits and receipts to ensure that all petty cash payments have been recorded and reconciling accounts payable and accounts receivable. To save time on these labor-intensive procedures, companies can invest in accounting software with AI-powered automatic reconciliation features. Such software can, among other things, automatically reconcile transactions against various records (such as the general ledger) as soon as the bank sends an update, and keep accounts payable and receivable on track by flagging discrepancies or unusual patterns.

Some companies take this a step further by adopting continuous accounting practices that disperse the work involved in closing the books throughout the accounting period, instead of concentrating it at month-end, and employing technology to automate many of those tasks. For example, AI-enabled accounting software can continuously monitor records throughout the month, automatically detecting and flagging potential errors or inconsistencies requiring human attention.

6. Set Clear Deadlines

Establishing a clear and reasonable closing date (say, three to seven days after month’s end) creates clarity and motivates the team to stay focused on the finished line without feeling unnecessarily rushed, which can increase the likelihood of errors or skipped steps. With that end goal in mind, leaders can then work backward to determine deadlines for critical tasks along the way.

7. Coordinate With Other Teams

Whether closing monthly or quarterly, finance and accounting leaders generally need cooperation from other departments to achieve an accurate and timely close. Cross-functional coordination is important to address discrepancies, missed entries, outstanding issues, or other data or reconciliation issues. The accounting team may need to talk to the marketing department about budget adherence, to operations about unanticipated expenditures, or to sales about unexpected last-minute deals that haven’t yet been recorded. In companies whose line of business and other managers don’t adhere properly to the PO process, it may also make sense to reach out to vendors to check on any outstanding invoices that need to be accrued. In companies with good cooperation in the PO process, though, those accruals usually happen automatically. Regardless, frequent communication helps make sure that nothing falls between the cracks and avoids added work and adjustments arising after the close.

8. Review and Iterate the Process

Once the month-end close is finalized, it’s a good idea to conduct a thorough review of both the outcomes and the process. Begin by examining the financial statements for accuracy and completeness, confirming that vital information, such as cost of goods sold, net income, and depreciation, are correctly reflected. Multiple team members should independently review each statement to catch potential errors or omissions.

Once the statements are submitted, shift focus to evaluating the process. Gather feedback from all team members, discussing what went well and any challenges they encountered. Identify bottlenecks, inefficiencies, or error-prone steps. This kind of collaborative reflection can uncover valuable insights and opportunities for improvement, which should be used to iterate and refine the process for the next cycle. This might involve adjusting timelines, reassigning tasks, or implementing new tools or technologies to address unexpected issues. Consider creating a formal improvement plan listing specific action items so that changes are actually implemented.

Remember that process improvement should be ongoing, not a one-time event. As a company grows and evolves, so, too, should its month-end close process. Regularly scheduled reviews—perhaps quarterly or semiannually—can help ensure that the process remains efficient and effective over time. This type of continuous improvement approach is key to gradually reducing the time and effort required for the month-end close, while maintaining or enhancing accuracy.

9. Leverage Automation

Manual accounting procedures make a monthly financial close more difficult in a multitude of ways. Most obviously, manually inputting data from invoices, receipts, bank statements, and other sources is time-intensive and prone to human error—which is a big problem for a process in which even small mistakes can end up creating discrepancies that require more time to investigate and correct. Manual processes become inconsistent if different team members don’t adhere perfectly to defined procedures, which makes audits more challenging. They make real-time data access virtually impossible, they limit collaboration, they increase team stress and contribute to burnout, they raise compliance risk, and they simply don’t scale well enough to keep up with a fast-growing business.

Leveraging accounting automation, meanwhile, can establish consistency across the organization, reduce errors, enable more accurate tracking of invoices and receivables, streamline reconciliations, ease communication with vendors and internal stakeholders, and lower costs.

In fact, leading business software platforms, such as enterprise resource planning systems with integrated accounting and finance capabilities, can automate many month-end close workflows. Their automation capabilities range from basic robotic process automation to more sophisticated AI-powered automation. AI can help enhance the closing process by, for example, automatically categorizing and matching transactions, detecting anomalies and potential errors in financial data, reconciling accounts by comparing data across multiple sources, analyzing historical data to identify patterns and trends for forecasting, validating journal entries, automating routine compliance checks, enabling business managers to generate real-time financial insights through dynamic dashboards, and flagging unusual patterns that might indicate errors or fraud.

These AI automations help reduce the risk of human error in routine tasks and free up finance and accounting team members to focus on higher-level analyses and strategic decision-making.

Accounting Software Takes the Stress out of Closing

The breadth and complexity of accounting tasks involved in the month-end close is a leading factor in lengthy closing timelines. While it might seem that large, global companies would have a bigger challenge closing their books, it’s also a challenge for small and midsize businesses that have fewer people available for the effort. In all cases, investing in accounting software can transform, automate, and streamline the month-end close on a number of fronts, such as digitizing the collection and organization of relevant data, automating reconciliations and looking out for discrepancies, and increasing visibility throughout the process.

NetSuite Cloud Accounting Software has capabilities that cover general ledger, cash management, accounts payable and receivable, tax management, fixed assets, and payment management—all of which are required elements for closing the books. NetSuite’s AI capabilities can automate tasks ,such as journal entries, transaction categorization, anomaly detection, account reconciliations, variance analysis, intercompany transactions, and compliance checks, while providing predictive insights for better financial planning. With NetSuite, rather than having to hunt for data in siloed software systems or, worse, scattered among spreadsheets, receipts, and countless other documents, accounting teams have centralized software dedicated to accounting processes to help speed their work. NetSuite software can increase accuracy by eliminating duplicate data and errors resulting from manual entry or reentry, help to maintain compliance with accounting standards, and offer greater visibility to others in the organization with real-time metrics and role-base dashboards to monitor financial performance.

The month-end closing process can be a laborious and time-consuming task, but implementing best practices can minimize that and improve the process at the same time. Investing in greater organization, clearer checklists, better recordkeeping and data gathering, proactive reconciliation, cross-functional coordination, and modern finance and accounting systems that automate routine tasks can help companies take the sting out of this monthly exercise.

Month-End Close Process FAQs

What is the goal of the month-end closing process?

The goal of the month-end closing process is to provide an accurate accounting of a company’s finances every month. This makes it easier to perform the year-end close and offers several other benefits, including improved accuracy and consistency of financial statements, increased availability of critical business data for decision-making and performance tracking, more accurate recordkeeping, easier audits, and reduced financial and compliance risks.

How long does it take to complete the month-end close process?

The time required for the monthly close can vary, depending on company size, financial complexity, transaction volumes, finance/accounting team size and experience, level of preparation, and whether the organization uses accounting systems with automation capabilities. The highest-performing teams can close their books each month in a day or two, while low performers may take more than 10. Of course, speed should never come at the expense of accuracy or effectiveness, as this will only extend the process later on when the team has to account for errors or discrepancies.

What are the benefits of a faster month-end close?

Companies that adopt more organized processes to complete a faster month-end close can achieve a number of benefits. First, it is less stressful and time-consuming for the team involved in the close. Second, closing the books sooner gets valuable financial information to the rest of the organization more rapidly for better decision-making and strategic planning. In addition, companies save money when they streamline their month-end close.