There’s no question that the month-end close can be stressful for finance and accounting teams.
Every controller has inevitably survived their share of late nights, endless reconciliations, material variances, and unexplained discrepancies.
But the month-end close doesn’t need to be a nightmare that burns out your finance team and sends you to an early grave.
In fact, with the right systems and processes in place, you can plan for the month-end close in a systematic and methodical way, allowing you to close faster and more efficiently.
Based on my experience as a controller and then VP Finance, here are some tried-and-true tips that will make the month-end close as smooth and stress-free as possible for your team.
1. List the month-end close tasks and get as detailed as possible
First list out every single task that needs to be completed in order for you to meet your reporting obligations, whether it’s to upper management, the board, or the stock market.
A month-end close tool like FloQast is excellent for this, but you can also use a simple collaboration tool like Trello or monday.com or even start with a simple Excel sheet.
There will be the obvious tasks, like bank reconciliation and revenue recognition, but don’t forget the little things such as:
- Recording share-based expenses and exercise price payments
- Documenting updates to the security deposits being held by landlords
- Updating your lease liabilities and right-of-use assets under ASC 842/IFRS 16
- Ensuring all the tasks are executed for the company’s subsidiaries if you have any
Cover the standard sections in the balance sheet and the P&L, and then think about the non-standard items that are unique to your business.
Get as detailed as possible, and don’t be afraid for the list to be several hundred items long if that’s what it needs to be – it will ensure that nothing falls through the cracks.
2. Identify the dependencies between tasks and structure the close process accordingly
This is one of the hardest parts of the month-end close process, in my opinion – identifying which tasks must be performed before others and mapping them out in a clear and logical order.
For example, if you want to review accrued expenses, you first need to record all bills from vendors and identify exactly what expenses you didn’t get billed for, which means you first need to close account payables in order for any of that to happen.
It may sound obvious, but most teams usually learn this the hard way – they either perform the same task twice in an inefficient way or rush to complete prerequisites for reports that catch them by surprise, which then causes panic, delays, and headaches.
3. Plan deadlines by reverse engineering the month-end close timeline
To close the month on time, you need to start with your final reporting date – which for many companies is the 15th of the month, or the 10th working day – and plan backward from there.
Go through your detailed list of tasks in reverse order. Estimate how long each task will take, assign the owner and involved team members, set deadlines accordingly, and work your way back until you get to the beginning of the process.
Every company will have its own timeline, and how long it takes will really depend on the size of your company, the complexity of your finance operations, and what kind of reporting obligations you have to your investors or the stock market.
Having said that, as a ballpark estimation, the end-of-month close timeline will generally take about seven to 10 working days for many finance teams.
4. Troubleshoot bottlenecks as they arise
The month-end close will always be a work in progress, and each time you go through the process, it will be an opportunity to revisit steps 1-3 listed above to tweak, refine, and improve your process.
Did you forget a task? Are there dependencies between tasks that you didn’t initially account for?
There will inevitably be things that take longer than expected or where your team gets stuck, which will give you the opportunity to stop and reevaluate.
Are your expectations surrounding the task realistic? Should the task be moved to another team member who has the right skills and experience? Should you improve the process?
In my experience, if and when finance teams realize they’re understaffed, it’s usually the month-end close process that triggers this realization.
All too often, it’s as simple as having too many tasks assigned to one person to be completed within an impossible timeframe.
5. Anything you can do before the end of the month, do before the end of the month
There are always going to be tasks that by their very nature need to wait until the end of the month to be completed.
But there are definitely many tasks that you can complete on an ongoing basis throughout the month that can “flatten the curve” of your workload and reduce the burden during the final few days of the month when things get really hectic.
If the task is transactional, high-volume, and not a cut-off item, then it’s likely a good candidate for something that can be performed on a continuous basis, not just once a month.
For example:
- Petty cash reconciliation can be performed on a continuous basis so that you don’t need to wait to the month-end close to release payments
- Revenue allocation with respect to ASC 606 can be time-consuming. Rather than waiting until the end of the month to get started, do it as soon as the contract comes through.
- If you're approving expenses by the 20th and you pay them in the month-end payroll, you’ll probably be able to record all of the expense reports before the end of the month actually approaches
6. Create a collaborative month-end checklist for your team
Whether it’s Asana, monday.com, Trello, or a month-close dedicated tool, use a collaborative tool to create a month-end close checklist for everyone on your team to turn to and update in real-time.
Clarify the roles and responsibilities of every single team member and clearly designate in the checklist who is preparing what, who is reviewing what, and which deadlines are associated with each task.
It doesn’t need to be fancy; get started with something as simple and when you need more controls and proper segregation of duties, you can upgrade to a dedicated month-end closing tool, which will provide much more functionality and even ERP integrations.
7. Keep your documents in one centralized location
Stay organized by keeping all relevant documents and files in a centralized location. Not only will this help you better communicate as a team – no more long email chains with lost attachments – but it’s critical for record-keeping, not to mention audits.
It can be as simple as using Google Drive with dedicated folders for each month where you store all your working papers – e.g. December 2022, January 2023, and so on. Keep all documentation centralized in one location for everyone to access and work on.
8. Make sure all the stakeholders in your organization are aligned with your deadlines
There are a lot of teams in your organization that you need to collaborate with to close the month properly, both within and outside finance, including treasury, FP&A, HR, and the management team.
Make sure all of these stakeholders are aligned on what’s required from them and what the deadlines are for you to close the month on time.
For example, you can’t run revenue recognition until RevOps tells you they’ve recorded everything properly in Salesforce. It might take them a few days at the beginning of the month to process, and you’re stuck until it’s done, so being very synced with them about the timeline is critical.
9. Automate everything you can
Anything that you can automate, that’s what you should be spending your time on. Integrate every possible system or process you have with your ERP and automate everything that you can automate.
It’s my motto, and seriously, it’ll change your life.
Not only does automation dramatically reduce the incidence of errors and mistakes, but it will also free up your team’s time to step away from Excel and spend time on work that really matters.
Here are some common finance processes that are great to automate:
- Reconciliation of high-volume transactions that are fragmented across PSPs, banks, billing solutions, databases, and your ERP
- Travel and expense management into your ERP to avoid manually wrangling and recording expense reports and employee reimbursements
- Sales tax so that you don’t need to manually Google the right tax code and manually invoice the customer
- Spend management with a virtual credit card provider that automates the recording of journal entries to manage your corporate credit card spend
10. Keep audits in mind throughout the year
While audits only happen once a year, the bulk of audit prep is actually done throughout the year during every month-end close.
Keeping your books clean on an ongoing basis, addressing issues as they arise, and thoroughly documenting everything as you go will make your annual audit infinitely easier.
Here are some tasks to focus on during the month-end that will feel like an absolute life-saver once the audit rolls around:
- Record journal entries in as much detail as possible so that you’re able to provide quick and precise answers without the hassle of investigating in the midst of an audit
- Minimize the number of unknown transactions that are recorded against “general” on your undeposited funds account. While we all get customer payments we can’t recognize, make an effort to work with the bank to identify the customer and reconcile it against the right account. You don’t want to end up with a black hole of unreconciled transactions at the end of the year.
- Keep your schedules and balance sheet breakdowns, such as other assets, security deposit or other liabilities updated throughout the year, so that you won’t have to roll them forward a full year when it’s the most stressful.
Final thoughts about why the month-end close matters
The month-end close may not be sexy or exciting, but it’s the backbone of the finance function and ultimately every business. It’s worth investing time, energy, and resources into getting it right.
Gaining control over your month-end close doesn’t just save your team time and energy; it enables you to turn a burdensome and often overlooked process into a strategic business driver.
By delivering accurate, up-to-date financial data quickly, you enable FP&A to make more accurate forecasts, CFOs to make smarter liquidity and investment decisions, and CEOs to make more informed choices across the board.
