Essential guide to month end close: processes, checklist, and best practices

Prophix ImageProphix Jun 11, 2024, 8:00:00 AM

Struggling with the chaos of month-end close? You're not alone. Many finance leaders contend with reconciling accounts, validating data, and meeting tight deadlines, often resulting in errors, and working long hours.

This essential guide is your solution to a challenging month-end. Learn how to streamline processes with a comprehensive checklist and implement proven best practices to turn your month-end close from a headache into a process you look forward to.

What is the month-end close process?

Month-end close is part of a larger process called financial close that happens at the end of each month. During the process of closing the books, the finance team goes through all transactions from the last 30-31 days to understand how much was spent, how much revenue was generated, and how close the organization is to hitting its financial targets. Month-end close is only one type of close – organizations tend to also close their books at year-end.

Why is month end close important?

Month-end close is an important exercise for finance teams looking to understand how the past month’s activities impact profits, payments, and plans. Month-end close can help companies ensure they have accurate account statements by identifying unexpected and inaccurate transactions, which can also have a positive impact on your bottom line.

Month-end close can also speed up other processes like account balances and expense reports, by compiling the data necessary to run these reports at a later date. Similarly, month-end close can streamline audits by establishing a consistent and accurate monthly record of reviewed transactions.

What are the steps for a successful month-end close?

A successful month-end close is accurate, agile, and auditable. But what does it take to achieve this?

Broadly speaking, the steps for a successful month-end close include removing duplicate data and errors, standardizing, and automating workflows, and enhancing compliance and efficiency with finance technology.

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First, you should collect, review, and validate your month-end close data to catch and correct any mistakes or inconsistencies. Clean data will help speed up your month-end close by reducing the need for backtracking and corrections. Accurate data lays the foundation for reliable financial reporting.

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Month-end close is a good opportunity to standardize and automate workflows. Ask yourself, do I repeat the same set of processes every month? Who is involved in these processes and how can I make it easier for them to participate? These types of workflows are great for automation, which can save time and reduce the risk of human error.

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Third, and perhaps most importantly, you should make sure you’re meeting all the necessary regulatory requirements, which can help you avoid penalties and maintain a good relationship with your stakeholders and investors. Ensuring compliance not only protects your organization but also builds trust and credibility.

However, it can be challenging to improve your data, streamline processes, and meet your compliance requirements without a financial performance platform to validate, automate, and review your data. Leveraging the right technology can transform your month-end close from a cumbersome task into an efficient operation.

3 steps for a successful month end close

Complete month-end close checklist

Are you ready to streamline your month-end close? This step-by-step checklist will ensure a seamless financial close month after month.





Collect and organize financial data

Gather all necessary data such as expenses and incoming funds from the previous month, including payroll, insurance, loan interest, vendor payments, revenue, and investment income. Ensure accurate posting of credit and debit entries and invoice all sales from the last month.


Update accounts payable

Review your accounts payable ledger against your AP aging report to identify discrepancies, input pending invoices, and post relevant journal entries.


Audit accounts receivable

Examine invoices sent out in the past month for duplicates or errors. Verify customer payments and match them with ledger balances to ensure accurate financial reports.


Conduct account reconciliations

Reconcile bank and credit transactions with your general ledger. Identify and correct inconsistencies by making the appropriate journal entries.


Reconcile cash balances

Record all petty cash transactions, reconcile deposits and receipts, and verify that petty cash balance matches expectations. Track any cash in transit.


Inventory and fixed assets assessment

Review current inventory against products sold in the past month. Inventory reconciliation helps manage storage, predict next month’s sales, and address related expenses.


Align payroll and operating expenses

Reconcile your payroll account with the payroll register, including bonuses, commissions, and benefits. Verify correct posting of payroll entries and payment of necessary taxes and deductions. Reconcile operating expenses by creating and posting an expense report.


Preliminary reviews and ASC 606 compliance

Check income recognition and commissions data for accuracy. Review with your team to ensure consistency and clarity in financial reports.


Perform variance analysis and adjust

Conduct variance analysis to compare monthly and quarterly results against company growth targets. Make timely adjustments to prevent minor issues from escalating.


Compile financial statements and reports

After reconciling accounts and correcting errors, compile financial statements and month-end close report for comprehensive documentation of financial activities.

Month-end close best practices

Month-end close is crucial for providing an accurate picture of your organization’s financial status on a recurring basis. Implementing these best practices can help reduce the time and resources required, while enhancing the quality of your financial reports.

1. Conduct pre- and post-month-end close meetings

Effective communication is crucial when executing your month-end close with a team.

  • Pre-close meeting: Schedule this a few days or a week before starting the close process. Review everyone's responsibilities, walk through each step, and address any issues from the previous month.
  • Post-close meeting: Use this session to review any problems encountered and highlight what went well. This continuous feedback loop helps refine the process over time.

2. Build relationships across the organization

Collaboration with budget owners and account holders is vital. Accounting and finance teams working in isolation risk missing critical details that affect accuracy.

  • Data sharing: Strong relationships ensure all necessary data flows seamlessly to your finance team.
  • Early warnings: Being informed about significant purchases or revenue changes in advance allows your team to prepare and handle these factors proactively.

3. Stay organized and efficient

Efficiency in other financial processes directly impacts the ease of your month-end close.

  • Address inefficiencies: Improve processes in areas such as account receivables, budget approvals, and accounting software.
  • Maintain organization: Keep the accounting and finance teams organized throughout the month. Identify and remove productivity obstacles to streamline workflows.

4. Leverage accounting automation

Automating parts of your month-end close can significantly reduce manual labor and errors.

  • Reduce manual work: The right automation tools can save hours or even days, making the close process quicker and more secure.
  • Enhance accuracy: Automation minimizes human error, ensuring a smoother month-end close that can be completed efficiently.
Month end close best practices

FAQs about month-end close

How long should month-end close take?

The duration of your month-end close can vary depending on the size of your organization, the quality of your data, and your industry. However, a month-end close that takes less than five days is considered very efficient, and a close that takes more than 10 days likely has significant opportunity for improvement through automation.

How can month-end close be improved?

You can improve your month-end close by establishing a single version of truth for your data, standardizing processes, and automating reconciliations, all made easier with finance technology like a financial performance platform.

What makes an efficient month-end close?

An efficient month-end close can be achieved by using a month-end close checklist or template to manage processes, ensuring that everyone on your team understands what’s required, improving the speed and accuracy of your financial close.

What is month-end reconciliation?

Month-end reconciliation is the process of verifying financial records by matching transactions, including expenses and revenues, to ensure there are no errors or inconsistencies in your data or financial reports.

How to streamline your month-end close

Turn your financial close from chaotic to calm when you combine automation, technology, and collaboration to streamline your financial close.

And a Financial Performance Platform like Prophix One can help you identify and correct errors early on, standardize recurring processes, and reconcile your accounts for easier analysis at month-end.

Ready to streamline your month-end close? See how Prophix One Account Reconciliation can enhance your account reconciliation process and fast-track your month-end close. 

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