Month-End Close Process: Best Practices for Growing Companies

Every month, you transform raw transactions into financial statements. The close process is how you do it.

Companies with disciplined closes produce financials within 5-10 business days. They make decisions with current data. Their audits are smooth. Companies without discipline take 20-30 days to close, if they close at all. They make decisions with stale data and dread audit season.

This guide covers everything you need for an efficient, accurate close: the calendar, the checklist, the reconciliation procedures, and the review process.

Why the Close Process Matters

The close isn't bureaucracy—it's the foundation for everything financial.

Decision-Making

If your January financials aren't ready until February 20th, you're making February decisions with December data. By the time you see a problem, it's been getting worse for 6+ weeks.

Stakeholder Reporting

Boards, investors, and lenders expect monthly financials. PE sponsors typically require reports by day 10-15. If you can't close in time, you miss deadlines and erode confidence.

Error Prevention

A disciplined close catches errors while they're small. Without discipline, errors accumulate month after month until someone finally notices—often an auditor.

Audit Preparation

Clean monthly closes mean clean year-end. If you close well each month, annual audit is just another close with more documentation. If you don't, audit becomes a multi-month cleanup project.

The Close Calendar

A close calendar assigns specific tasks to specific days with specific owners. Here's a sample 10-day close calendar.

Day 1 (First Business Day)

• Bank feeds: Import all bank transactions from prior month
• Credit cards: Download and import credit card transactions
• Cut-off: Ensure no current-month transactions post to prior month
• Preliminary review: Identify any obvious gaps or issues

Days 2-3

• AP close: Process all invoices received through month-end
• AR close: Issue any remaining invoices, update customer records
• Payroll posting: Ensure all payroll entries are recorded
• Expense reports: Process outstanding expense reports

Days 4-5

• Bank reconciliation: Reconcile all bank accounts
• Credit card reconciliation: Reconcile all credit card accounts
• Intercompany: Post and reconcile intercompany transactions
• Prepaids and accruals: Update prepaid schedules, post accruals

Days 6-7

• Fixed assets: Post depreciation, update fixed asset register
• Revenue recognition: Update deferred revenue schedule, post revenue
• Balance sheet reconciliations: Reconcile all remaining BS accounts
• Adjusting entries: Post any remaining adjustments

Days 8-9

• Controller review: Review all reconciliations and entries
• Variance analysis: Compare to prior month and budget, investigate variances
• Clean-up: Address any issues found during review
• Draft financials: Generate preliminary financial statements

Day 10

• Final review: Final sign-off by controller
• Financial statements: Generate final financials
• Management reporting: Prepare management package
• Distribution: Distribute to stakeholders

The Close Checklist

A close checklist ensures nothing is missed. Every item should be checked off each month.

Cash and Banking

• All bank transactions imported and categorized
• Bank reconciliation complete (all accounts)
• All reconciling items investigated and documented
• Outstanding checks reviewed (investigate items >60 days)

Accounts Receivable

• All invoices issued for the month
• Payments applied to correct invoices
• AR aging reviewed (investigate items >60 days)
• AR subledger reconciled to GL

Accounts Payable

• All vendor invoices entered
• Proper cut-off (no next-month invoices in current month)
• AP aging reviewed
• AP subledger reconciled to GL

Payroll

• All payroll runs posted
• Payroll liabilities reconciled (taxes, benefits, etc.)
• Payroll register reconciled to GL
• Bonus accruals updated (if applicable)

Revenue

• All revenue recognized per policy
• Deferred revenue schedule updated
• Revenue reconciled to source systems (CRM, billing)
• Commissions accrued (if applicable)

Fixed Assets

• Depreciation posted
• New assets added to register
• Disposals removed from register
• Fixed asset register reconciled to GL

Prepaids and Accruals

• Prepaid schedules updated and amortized
• Expense accruals posted (rent, utilities, professional fees)
• Prepaid and accrual accounts reconciled

Intercompany (if applicable)

• Intercompany transactions posted
• Intercompany balances reconciled across entities
• Elimination entries posted

Reconciliation Procedures

Reconciliations are the heart of the close. Every balance sheet account should be reconciled monthly.

What a Good Reconciliation Includes

• Opening balance: Prior month ending balance
• Activity: Summary of current month activity
• Ending balance: Current month ending balance
• Support: Detail supporting the ending balance (schedule, statement, etc.)
• Reconciling items: Explanation of any differences
• Sign-off: Preparer and reviewer signatures with dates

Accounts That Must Be Reconciled

Every balance sheet account, but prioritize:

• Cash: Every bank account, every month—no exceptions
• Accounts receivable: Subledger to GL, investigate aged items
• Accounts payable: Subledger to GL, review aged items
• Payroll liabilities: Taxes, benefits, 401(k)
• Debt: Loan balance per statement to GL
• Intercompany: Eliminate to zero in consolidation

Red Flags in Reconciliations

• Reconciling items carried forward month after month
• Large unexplained variances
• Rounding adjustments or "plug" entries
• Missing or incomplete documentation

Review Process

Preparation is only half the close. Review catches the mistakes that preparation missed.

What the Controller Reviews

• Reconciliations: Sample review, focusing on high-risk accounts
• Journal entries: All manual entries, especially non-standard
• Variances: Significant changes from prior period or budget
• Analytics: Do the numbers make sense? Any anomalies?

Analytical Review

Don't just verify math—question whether results make sense:

• Is revenue consistent with operational metrics?
• Are margins in expected ranges?
• Do balance sheet changes align with P&L?
• Are there unexpected large balances or swings?

Documentation of Review

Review should be documented:

• Sign-off on reconciliations reviewed
• Notes on questions asked and answers received
• Documentation of any adjustments made during review
• Final sign-off on financial statements

Common Close Bottlenecks

If your close is slow, these are the usual culprits:

Late Information

Waiting for expense reports, vendor invoices, or sales data delays everything downstream. Fix: Set hard deadlines with consequences.

Bank Reconciliation Issues

Unexplained items pile up because no one investigates. Fix: Require all items resolved before month-end; no carryforward without approval.

Complex Revenue Recognition

Deferred revenue calculations take days because they're manual and complex. Fix: Build automated schedules; simplify methodology if possible.

Manual Processes

Spreadsheet-based processes are slow and error-prone. Fix: Automate where possible; use accounting system features.

No Clear Ownership

Tasks fall through cracks because no one owns them. Fix: Assign every task to a specific person with a specific deadline.

Accelerating Your Close

Want to go from 15 days to 7? Here's how:

Continuous Accounting

Don't save everything for month-end:

• Reconcile bank accounts weekly (not just at month-end)
• Post accruals as you know them (not all at once)
• Update schedules continuously (prepaid, depreciation)
• Process invoices in real-time (not in batches)

Automate Repetitive Tasks

• Bank feeds: Auto-import and categorize
• Recurring entries: Set up automatic posting
• Reconciliation: Use software that matches automatically
• Reporting: Build reports once, generate automatically

Simplify Where Possible

• Reduce manual journal entries
• Consolidate accounts (fewer accounts = fewer reconciliations)
• Standardize processes across entities
• Eliminate unnecessary reports

Parallel Processing

Not everything is sequential. Some tasks can happen simultaneously:

• Multiple team members reconcile different accounts simultaneously
• Start revenue recognition while AP is still closing
• Begin analytics while final entries are posting

For a detailed guide on accelerating your close, see 5-Day Close: Accelerating Your Monthly Financial Close.