Key insights
- A strong month-end close begins with disciplined, consistent work throughout the month.
- Timely, accurate financial reporting supports better business decisions.
- Well-defined processes and automation can accelerate close without weakening controls.
- Thorough review and clear accountability strengthen the reliability of financial reporting.
Strengthen your close process for more reliable reporting.
A strong month-end close process helps your organization produce timely, accurate financial information so you can make better operational and strategic decisions.
Whether your challenges stem from inconsistent processes, manual workarounds, or unclear ownership, improving the close can reduce bottlenecks, strengthen reporting, and create more confidence in the numbers.
Learn about the importance of timeliness and consider eight practical ways to build a stronger month-end close process.
Why does a timely monthly close matter?
When monthly close is completed, stakeholders get a clear picture of operations from a financial lens. If month-end is completed timely, they get this financial information right after the period has closed so they can make quick decisions to align operations with growth goals, cash flow considerations, and improved profitability.
Your organization may have external requirements related to monthly, quarterly, or annual financial reporting which could impact areas such as funding or financing. The month-end close process should support meeting these deadlines.
Accurate and timely statements provide key data to support fiscal monitoring and decision-making impacting operational and strategic goals.
Consider the selected basis of accounting for your organization’s financial reporting. Cash or tax basis can be sufficient for some organizations, while others will desire or be required to report on the accrual basis of accounting (GAAP — Generally Accepted Accounting Principles).
If decision makers desire visibility into cash obligations owed to or due from the organization at a point in time, the GAAP basis is preferred.
A timely month-end close requires controlled and coordinated activities throughout the month related to people, processes, and systems. Processes and procedures should be set up to operate efficiently and incorporate internal controls to protect both the employees and organization.
8 ways to enhance the month-end close process
1. Record daily operational financial transactions
When the goal is to create timely and accurate financial statements, integrating procedures into daily operations can help facilitate a quicker monthly close. Activity should be recorded when it happens, rather than waiting until month end.
Departments whose activities impact financial records should help complete ongoing activities. They should provide the accounting department with complete and accurate source documents to record information into the accounting system.
Taking advantage of automation and integrations with the general ledger can save time. General ledger softwares are continuing to add automation and efficiencies, which helps your team focus on identifying and addressing anomalies rather than data entry or import.
2. Reconcile accounting system modules and subsidiary ledgers
Accounting systems often have integrated modules such as payables, revenue, or investments to manage a specific function of the organization. Part of the closing process is reconciling the subsidiary ledger with the general ledger.
Some organizations may have stand-alone software that needs to be reconciled with the general ledger. For example, a nonprofit may have revenue streams coming from programs, retail, and philanthropy.
The accounting system will be able to integrate programs and philanthropy, but retail may have a stand-alone system for point of sale and inventory control. Build a daily process that works between retail and accounting to capture, reconcile, and record summary journal entries from the retail system to the general ledger.
3. Reconcile bank and credit card accounts
All balance sheet accounts should be reconciled in accordance with your financial reporting policy. Bank accounts and credit cards should be reconciled first due to the coding and impact on other balance sheet accounts.
Organizations with numerous monthly transactions can benefit from reconciling cash on a daily or weekly basis. For example, increased visibility into cash position can help with projecting cash balances after an upcoming payroll.
Many general ledger systems and banks allow a direct feed from online banking, which helps reduce manual data entry and potential for error.
4. Reconcile balance sheet accounts and record monthly journal entries
Once you have reconciled bank and credit card accounts and made necessary adjustments, reconcile the remaining balance sheet accounts.
Posting cash transactions may impact balance sheet accounts, so once these transactions are considered, the account can be reconciled and associated journal entries can be posted.
Example: Coding a $5,000 purchase for a piece of equipment when your organization’s capitalization policy is $2,500. This purchase would already be coded to equipment versus an expense account. The fixed asset reconciliation would incorporate this purchase and recalculate a new depreciation expense amount for the month’s journal entry.
If recurring journal entries are set up in your accounting software, evaluate these entries and ending account balance as part of your process for each balance sheet account.
Revenue and expense accounts can also be evaluated as part of reconciliation. For example, a prepaid reconciliation can also tie out the related insurance expense accounts. Other examples include fixed assets and depreciation as well as revenue and deferred revenue accounts.
5. Perform analytical review
Run a preliminary trial balance or financial reporting package. Analyze comparable balances using professional judgment based on your understanding of business activities, impact on financial position, and results of operations. Examples include current year to prior year, current month to prior month, or current year-to-date (YTD) to budget.
This evaluation can help you:
- Understand significant fluctuations to include in executive summary of financial reporting package or explain to management or ownership
- Uncover errors, including unrecorded liabilities or fixed assets as well as improper expense coding
- Update understanding of financial position and YTD results, including potential impact on operational or strategic goals
- Provide insight for management decisions, including potential need for reducing expenses in certain areas, adjusting staffing, or pricing goods and services
6. Finalize financial statement package
Once the accounting team is satisfied the general ledger is accurate, you’re ready to finalize the financial statement preparation process.
Many accounting systems enable direct development and generation of financial statements. You also have the option to use financial reporting software in addition to Microsoft Excel to meet financial reporting presentation preferences.
7. Share results with management and governance
The final stage occurs when the financial reporting package(s) are shared with other members of management and governance as determined by your organization.
Consider the roles of each party: Management might desire more detailed financial statements, where ownership or board members may prefer higher level financial reporting, such as dashboards with graphs and KPIs.
8. Close accounting systems for the month
Once management and governance are satisfied with the financial statements, the accounting period is physically closed in the system, preventing future transactions from inadvertently being recorded in a previously reported period.
How CLA can help with closing the books
A stronger month-end close process can help your organization gain clearer insights, strengthen confidence in reporting, and make better business decisions.
Our Client Accounting and Advisory Services professionals seamlessly integrate our team with your own. We can work with you to evaluate your current process, identify opportunities for improvement, and provide accounting support tailored to your organization’s need.