Streamline the Month-End Close: A Step-by-Step Guide

Hiring plans, budgets, and overall company strategy hinge on the insights produced by the month-end close. But for teams operating without appropriate coordination and mostly manual processes, arriving at those insights can take up to 10 business days.

10 business days is essentially half of each month – that’s a long time for your leadership team to be navigating without a compass. 

By comparison, a streamlined month-end close can take as few as three business days. In just 72 hours, the books can be closed, leadership can get the insights they need, and your organization’s accountants can get back to doing other impactful work.

This article will cover how to streamline the month-end close while still delivering quality reporting and insights. Given how critical the close is to every mature organization, achieving faster, less burdensome closes should always be a priority.

Key Takeaways

• Streamlining the month-end close down to 3-5 days is possible, even for large organizations
• Before attempting to automate processes, standardize and document them
• Close checklists (including industry specific ones) are immensely valuable
• An ideal month-end close is not only fast, but consistent
• Accuracy always takes priority over speed

How to Streamline the Month-End Close

If your objective is to streamline the monthly close, consider a bottom-up approach. Solving the pain points at each step of the close, then retooling the overall close process so that these steps work in harmony, is how your month-end close can go from chaotic to cohesive.

When scoping out a potential month-end close modernization, the first question that may come to mind is how many days to target for the new and improved close. Industry benchmarks vary, but a realistic range for most companies is around 5-7 days. Closing in fewer than five days is also possible in many cases, but may require ongoing iteration depending on how highly manual your process is to start.

With the initial modernization push in mind, we’ve mapped out a phased approach for streamlining your month-end close below.

Step 1: Map and Audit Your Current Process

Just how manual is your current process? Being able to answer this question and identify the bottlenecks in your month-end close is the first step to building a better workflow.

Here’s how to uncover where your close might be stalling out:

1. Create a detailed inventory of all close tasks. For each task, identify owners, subtasks, and data sources.
2. Identify dependencies and build a timeline using a Gantt chart. 
3. Download existing general ledger data. Review it to determine:
   

• How were journal entries booked?
• What systems were used?
• Who booked each entry?
• When was the information first available?
  

4. Interview stakeholders and familiarize them with upstream and downstream dependencies.
5. Create a high-level swim-lane diagram to identify who benefits from the completion of month-end close activities. Look for major bottlenecks based on dependencies, workflows, and stakeholder feedback.

Ideally, this step-by-step audit will reveal where your workflow depends on time-consuming manual tasks, who is currently responsible for those tasks, and how they’re handling them. If one of your staff accountants, for example, spends time each month manually copying payroll data from the HR system into a spreadsheet in order to book payroll accruals, that may pose a bottleneck on the accountant’s time or on downstream dependencies.

Step 2: Standardize and Document Everything

At Numeric, we believe in the phrase, “standardize first, automate second” because it reminds us not to try to optimize processes unless they’re well-understood. 

Standardizing, in this context, means to create repeatable, documented rules for accomplishing a given task. Recurring tasks (like the ones involved in your month-end close) are particularly important to standardize because doing so prevents errors and leads to greater efficiency, even before you implement any automation.

Templates are one effective tool for standardizing your workflows..

Note: Numeric offers a selection of free accounting templates, including a month-end close checklist template. In addition to our standard month end-close checklist template, Numeric offers industry-specific close checklist templates for:

• SaaS companies
• Retail businesses
• Non-profits
• Real estate firms
• Manufacturers

Your templates, along with other essential financial documents, should live in a centralized data repository or document management system. This reduces time spent searching for documents and makes your team more audit-ready. It’s also a good idea to standardize the structure of this system, using clear folder hierarchy and consistent naming conventions.

Step 3: Build a Comprehensive Close Checklist

The close checklist is your team’s master document for tracking progress toward the month-end close. Task categories, individual tasks, frequency (whether monthly, quarterly, or annually), and actual task descriptions provide an overview of the close. Preparer and reviewer tags (plus due dates for each), as well as business day due dates, create accountability. 

Companies might begin this work in Excel or a project management tool like Asana, etc., but high-level finance teams often use a dedicated close management tool like Numeric to put the close on autopilot. 

No matter the size of your organization or the industry you’re in, using a standardized close checklist promotes diligence and efficiency. When everyone on your team is invested in completing the same master checklist, they’re more likely to be invested in delivering a speedy and effective close.

Step 4: Move Tasks to the Pre-Close Period

If your month-end close is painful, then a “continuous close” or “continuous accounting” might sound downright agonizing. In fact, it’s just the opposite.

One reason why the traditional month-end close is stressful is because all the work is frontloaded to the beginning of the subsequent month. Closing the November books, for instance, involves several intense days of work at the beginning of December. The idea behind the continuous close is to distribute this work during the month of November itself, lightening the workload during those critical first days of December.

In practice, this can mean processing amortizations continuously, doing some variance and flux analysis and commentary mid-month, or monitoring transaction data in order to catch miscodings as they occur. Any activity that can be shifted from the close period to pre-close is a potential break for your team when crunch time comes.

Continuous accounting, however, relies on high-quality, real-time data. Managing data complexity will enable you to address the bottlenecks which typically challenge the feasibility of continuous accounting, and creating robust data integrations will aid with speed and accuracy.  

That’s why teams like using Numeric, where best-in-class ERP integrations make data visibility as real-time as possible, and reporting and monitoring tools reveal any omissions or other errors.

Step 5: Automate Routine Tasks

The preceding steps are intended to improve your month-end close, but really, they’re the precursors to automating as much of your workflow as possible.

When processes are automated, it can be as easy as setting a schedule for them to run without any human intervention. In other cases, a team member can click “run” or “refresh” and the system will automatically run a task. This turns manual tasks of 30-60 minutes (or longer) into quick reviews and quality checks.

Although automations require time to set up and maintain, there’s no doubt that they create value during the close, when your team’s time is most precious. Setting up Monitors in Numeric, for example, allows you to receive automated alerts that catch errors ahead of month-end reconciliations. Numeric clients like Soundstripe are also leveraging balance sheet automation by using automatic alerts and connected schedules to stay ahead of the month-end close, even during team member PTO periods or new member onboarding.

Step 6: Establish Clear Communication Protocols

The month-end close is important because it provides stakeholders with the data points, reports, and insights they need to make decisions. An outstanding close process recognizes this fact and earns buy-in from stakeholders during the close process itself.

When you let stakeholders know about close-related issues or changes ahead of time (or even set up regular check-ins on your continuous close efforts), it creates trust in your process. Stakeholders who base forecasts on the results of your close want to know whether those results will be delivered reliably and on-time. And, if you want to modernize your month-end close, the teams who depend on it deserve a seat at the table.

Firstly, establish a clear pattern of communicating material changes in your close process. Then, consider implementing real-time dashboards or checklists that show your team’s progress on continuous and month-end close tasks.