Implementing Your Month End Close Process

accountability cash flow financial best practices planning procedures process improvement Jul 10, 2023


[Listen to the Podcast version here]


It’s the beginning of a new month.

In sales, this is an exciting time because you have another chance to meet, or even better, exceed your monthly goals!

In accounting, it’s time to buckle down, finish bookkeeping for the prior month, and issue financials.

Sounds fun, right?

For me it does because I love to watch the financials transform as all the month end tasks are completed and the numbers fall in line. But, if you’re like many business owners, you don’t look forward to this or aren’t sure what I’m talking about!


What is month end close?

Month end close is the process of reviewing, finalizing, and closing the prior month’s financial transactions. In essence, it’s making sure that the transactions recorded in your accounting system are accurate and complete.

Implementing a month end close process can be helpful for many reasons:

  • Gives you the opportunity to correct posting errors and omissions
  • Keeps your receivables and payables up to date
  • Makes it easier for your CPA to prepare your taxes
  • Assists in acquiring financing and maintaining compliance
  • Ensures your books are accurate and organized in case of an audit


What should be included in month end close?

The point of month end close is to verify that all financial transactions have been entered for the month and the data is correct so financial statements can be issued.

With that in mind, it’s important to ensure that related transactions are completed in your accounting system prior to month end close beginning. Your list could look something like this:

  • Sales
    • New customers entered
    • Customer pricing entered (if not standardized)
  • Inventory Control
    • Cycle counts approved
    • Inventory adjustments posted
  • Shipping & Receiving
    • Material receipts posted
    • Shipments posted
  • Production & Manufacturing
    • Production activities posted
  • Accounting
    • All expense reports entered (for company cards and personal reimbursement)
    • All customer invoices issued
    • All vendor bills entered
    • All customer and vendor payments entered

Think of this as your pre-close checklist.

Once all of the pre-close activities are completed, then the person(s) responsible for completing month end close can begin. This process is typically managed by a member of the accounting staff or an outsourced accounting services company but could also be the owner(s) if no one else is in place to assist.

Typical month end close activities include:

  • Bank and credit card account reconciliations
  • A/R and A/P reconciliations
  • Loan reconciliations
  • Payroll reconciliation

In case you’re not familiar with the term reconciliation, this is the process to verify system balances against documents (usually through statements and/or other system information) to ensure the reported balances are correct. If you’ve ever balanced your checkbook, you’ve done a reconciliation!

Once the month end close activities are completed, then financial statements and other reports can be prepared and dispersed to the appropriate people. If the business is required to submit compliance reports to bank or other entities, these reports would also be completed and dispersed.

The tasks included in the pre-close and close process should be limited only to those required to prepare accurate financial statements and compliance reports.

This doesn’t mean you can’t have other activities that you want completed on a monthly basis, but those activities should be managed outside of the month end close process.


Who is involved in month end close?

This really depends on the size and complexity of your business.

If you are a business of one – you – then you are the one ultimately responsible for completing the month end checklist and preparing your financials unless you outsource some or all of this responsibility.

If you have employees and/or contractors, then their contribution to the month end close will be based on their roles.

As you hire more employees and/or contractors that are involved in this process, the best way to keep track of who is responsible for what is to create a RACI Matrix.

RACI stands for:





For each task in your “pre-close” and “close” activities, you would identify the person(s) that need to be assigned to each category. In some instances, the same person may be listed in multiple boxes.

For example:

All expense reports entered:     

(R) A/P Clerk      

(A) A/P Clerk     

(C) Employees with expense reports and/or their managers

(I) Managers

You can easily drop this into a spreadsheet with names to view all tasks and assignments for reference.


When should month end close happen & how long should it take?

Technically, month end close starts the first day of the next month.

Ideally, when month end comes, there will only be a couple days’ worth of transactions to get into the system so month end close can begin, but in many businesses, this is far from reality.

It’s not uncommon for me to meet business owners who have never formally closed the month – or the year, for that matter! In other cases, some items are reviewed, and others are put on the back burner because there’s not enough time in the day and processes need some work to make it easier to manage.

If you’re reading all of this and starting to panic, take a deep breath and let it go!

Here are a few things to keep in mind as you think about how long it should take you to close the month:

  • If this is a completely new process for you, be kind to yourself. Cleaning up past data and getting to a good starting point can take some time.
  • If you have a fairly simple business, your process could be as easy as: invoices are issued, payments are posted, bank and credit cards are reconciled, financials are ready to go!
  • If your business is a little more complicated, it’s likely that your month end close process will be longer, at least in the beginning.

Some businesses can close the books in 5 days, some do it in 30. At the end of the day, it’s best to pick a time frame that’s doable for your business now and work towards reducing your close time as you implement new processes and assess resource needs. Getting started is more important than stressing your business trying to do it all at once.


Don’t have a month end close process? Get started now!

This process is going to vary based on your specific circumstances. Here are some tips to get you started:


No. 1 – Have you filed your tax return for last year?

This is important because it will determine when corrections can begin in your system. If you filed a tax return for the prior year already, then you cannot make any changes in your accounting system prior to the year end date (typically 12/31 but some businesses have different fiscal year end dates).

Consult with your CPA:

  • If you think your prior year return may need to be amended due to variances in your financial data
  • If the return hasn’t been filed yet, how long do you have to get the adjustments made to file on time? What resources can your CPA provide to assist?


No. 2 – Assess what you are doing now

  • Do you reconcile your bank and credit card accounts now? Or have in the past?
  • Is your Accounts Receivable Report up to date? (if you have one)
  • Do you track vendor bills (Accounts Payable) in your system or just record the expense when a payment is made?
  • Do you have inventory? If so, are you tracking it in your accounting system, in a spreadsheet, etc.? Do your financials reflect your current inventory value?
  • Do you have personal expenses recorded as business expenses? If so, these need to be removed from your P&L!
  • How are you paying yourself? (Payroll, distributions, or both?) Are these recorded correctly?
  • What other activities have a financial impact that you need to review?


No. 3 – Clean up your data

Before you can fully implement a streamlined month end close process, your data needs to be as accurate as possible. You won’t be able to close if your balances are off from prior months.

Reconciling your bank and credit card accounts is top priority. This will ensure that your cash balance is correct, customer payments are recorded, and expenses are posted to the P&L. Just doing this knocks out a huge chunk of your data!

Then you can move on to reconciling other items like loans and inventory.

If bad/incomplete data is a recurring weak point for your business, I wrote another article with additional information on how to break the cycle of bad data. Check it out here!


No. 4 – Create your RACI Matrix & close timeline

Which items should be on your pre-close and close checklists?

Who is responsible for them and when should they be done?

Drop it into a spreadsheet so you can keep track!


No. 5 – Preparing for implementation

 Are there written processes for each of the pre-close and close items? If not, take some time to document them and make sure everyone understands what is expected of them and why you are implementing these processes. You may need training days and additional tools to assist your team in meeting the new requirements.

In past month end close implementations, Asana and Teams have performed well as month end close dashboards to keep track of individual tasks, due dates, and accountability.


No. 6 – Rolling out month end close

If you have a complicated business and/or have a lot of people involved in this process, it may be easier to break this down into phases, so you don’t overwhelm everyone and cause service issues.

Your plan could look something like this:

Phase 1 – All income and expenses are recorded within 5 days of month end (pre-close task). Bank, credit card, and other loan accounts are reconciled within 10 days of month end (close task).

If you have a simple business structure, this may be all you need to do!

Phase 2 – Accounts Receivable and Accounts Payable are reconciled within 10 days of month end (close task)

Phase 3 – Open sales orders and purchase orders reviewed/closed within 10 days of month end (pre-close task)

Phase 4 – Implement cycle counts to begin correcting inventory balances (if applicable) (pre-close task)


Putting things into perspective

Creating and implementing a month end close process takes time. Hitting your initial close deadline and slowly reducing the time to close is an ongoing process. Don’t be surprised or upset if you don’t get it right the first time – you probably won’t! Just like any other process, adjustments will need to be made as you and your team explore the process together and come up with new ideas to make it easier and faster!


Need help getting started?

Harrington Strategic Partners offers bookkeeping catch up services and process development and implementation services on a project basis to make the process as pain free as possible and get you started right away!

Schedule your call today and let’s talk about how to get started!


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