Month-End Close Process Checklist: How to Get Through Your Financial Close Efficiently
The month-end close process is crucial for any business, but it’s also highly time-intensive. Building the right month-end closing process checklist helps your team members break out of the reporting silo and into a more strategic business seat.
Content Marketing Writer
The month-end close process is crucial to the financial health of a business—not just because it’s responsible for maintaining long-term financial integrity, but because it creates the foundation for CFOs and finance teams to analyze numbers and find growth opportunities.
But it’s also one of the most time-intensive and tedious business processes.
In an episode of The Role Forward, Temi Vasco, Controller at Gem, emphasized how an efficient month-end close process helps leaders make better-informed business decisions and frees up finance and accounting to focus on more forward-looking, strategic tasks.
Reducing the close times from 3 weeks to as few as 5 days comes down to automating repetitive tasks and having a solid month-end close process checklist in place. Here’s how you can get through your month-end close process more efficiently. (And be sure to download the full month-end close checklist template to streamline your process.)
Table of Contents
What Is the Month-End Close Process?
The month-end close process involves accounting teams collecting, reviewing, and conforming transactions and financial activity from the previous month. It is used to ensure accuracy and compliance while maintaining data integrity for financial planning and analytics.
While there’s a certain level of predictability in expenses and transactional activity, each month may come with new wrinkles to account for. This is why Vasco emphasizes that the month-end close needs to have a firm sense of flow—from the moment the team starts to gather information to when it crosses the finish line with finalized financial statements.
A High-Level Month-End Close Process Flowchart
Over 50% of companies report that their month-end close process takes two to three weeks to complete.
That means that by the time they finish last month’s reporting, it’s nearly time to start the whole cycle again for the next accounting period. Teams need to get out of this vicious cycle by mapping out a more streamlined timeline.
This month-end close process flowchart should give you a high-level idea of what a high-growth B2B SaaS company like Gem has to cover each period. But keep in mind that each general task will have many individual steps under it. And the timeline will depend on the specific context of your business.
A simplified flow chart for our month-end close checklist template
- Day 1. Prep work: Send emails to vendors about outstanding invoices. Check in with sales to ensure there are no revenue hang-ups and that sales pipeline metrics are accurate. Review any manual entries for accuracy (but don’t worry about reviewing automated postings at this early stage).
- Day 1. Cash and bank reconciliation: Review and reconcile your cash balance. If there is incoming cash in transit, note where it’s going and what it’s related to. Vasco encourages double-checking any clearing accounts to ensure everything is organized (including your petty cash fund) and bucketed correctly.
- Day 2. Account operations: Review and reconcile accounts receivable (AR) and accounts payable (AP).
- Day 3. Accrual estimates: Review all accruals regarding month-end, alongside tracking scope for next month. Account for prepaid expenses, such as salary.
- Day 5. Preliminary and ASC 606 reviews: Double-check any manual and automated data flows involved in SaaS revenue recognition and commissions. Test for reasonableness, and conduct a preliminary walkthrough with the team to ensure information makes sense and aligns across the report.
- Day 6. Conduct flux analysis and adjust: Vasco noted this as “flexing your financials.” Review and check your month-end close findings month over month and quarter over quarter to see how the report looks against your company’s growth goals and expectations. Potentially expand to year over year if something looks odd and you need to make any adjustments.
- Day 8: Wrap up and deliver: Treat the report like it’s ready to issue out. Review it once more, then deliver it to the executive team for review.
Keep Your Team on Track with a Month-End Close Checklist
Asking someone for a month-end close checklist is a bit of a loaded question. These are typically bespoke processes tailored to the individual needs of an organization. But there’s just so much to tackle. Having a checklist template is a helpful starting point for building out that bespoke process. According to Vasco:
“If the financials aren’t done correctly, or the process is mismanaged, I call it, ‘You get too much too late.’ If your close process isn’t standardized or you don’t have specific paths to follow, something might fall through the cracks. And when it does, you can’t make back decisions based on that.”
What Goes Into a Month-End Close Checklist?
Nailing down an air-tight month-end close checklist ensures your team not only gets the numbers to the business as quickly as possible, but gets information over with the utmost accuracy to make more informed and better decisions.
Categories give you a broad, high-range view of the financial landscape. Typically, your categories include:
- Cash and cash equivalents. Review all cash transactions and reconcile bank account balances to create a foundation for your financial statements, cash flow analysis, and any cash flow forecast. Finalize journal entries in your ERP and save credit card/bank statements for your financial records.
- Prepaids and other assets. Before the period ends, review prepaid expense reports, entries, and amortization records for accuracy. Then after the period ends, finalize new prepaid expense entries and remove any that are fully amortized.
- Fixed assets. Record ASC842 lease amortization if applicable, as well as any prepaid rent. Account for equipment depreciation and ensure you classify expenses that cross your capitalization threshold.
- Accruals and other liabilities. Reconcile invoice payments, record accrual estimates for sales commissions, and tie accrual schedules to the ERP.
- Payroll and benefits. Align HRIS data with total payroll across departments in the ERP.
- Equity. Record any stock-based compensation expenses or equity transactions.
- Revenue and expenses. Record revenue share for closed-won deals and post revenue recognition entries to the ERP. Create and review flux explanations after all profit and loss statements and balance sheet accounts are closed.
- General close and reporting. A catch-all category for additional reviews for account reconciliations, final financial statements, board materials, etc.
Description of each task
You’ll then break each category into tasks. And this is where you will get into the finer details for organizing your team toward efficient collaboration as they complete the month-end close.
Be as detailed as you want, but don’t bog down the checklist in information. Create manuals to go deeper into the process and expectations to consider a task as complete or when your team can jump into the next step.
Prioritization of tasks, set by days
Once the finer tasks are described, it may set a precedent for what will take more time and what information is required before starting the next task. Take a cue from Vasco’s timeline, where she places time-intensive tasks like checking record sales for inaccuracies or following up with vendors and reconciling outstanding invoices as prep (Day -1) and first-day items. This ensures plenty of time to get a response and not hold up other tasks as much as possible.
Columns to name preparers and reviewers
Collaboration requires transparency: The team must know who owns what part of the month-end close process. List names in each column to encourage autonomy and teamwork: Your team acknowledges when they complete a task and can have an additional review before moving toward the next section, which continues to strengthen the accuracy of the report at every stage.
Time for full financial statement review
Your accounting and finance teams know the rhythm of the business, such as when vendors pay invoices and when your company pays their expenses (like software bills and salaries). Lean on these teams to set the timeline for overall review, including checking automated figures. While reviewers are noted throughout the process, Vasco schedules an overall review of the report around Day Six to account for any potential inaccuracies.
Repetitive Tasks That You Can Automate in Your Month-End Close Process
Business owners can’t forecast the future until they know the actuals from the prior period. The longer your bookkeeping takes, the staler the financial data gets, which hurts the accuracy of any forecast.
Business partners are no longer content with long reporting cycles—they want faster insights from financial information. And you get faster insights by automating tedious, time-consuming tasks.
Finance and accounting need to find any and all opportunities to automate tasks in the monthly closing process. This is what frees their time to not only close faster, but contribute to larger conversations around strategic business goals. These are some common ways to use SaaS accounting software, financial close software, and other tools to automate aspects of your month-end close process.
Emails and Reminders
The month-end process starts just before the end of every month, when you’re doing prep work like wrapping up outstanding vendor invoices.
Close management solutions and other SaaS accounting software like FloQast offer reminder features that automate emails to vendors to ask for invoices or anything past due. Instead of manually running through a list of vendors to contact and sending out templated reminders, automating the process lets you focus on more valuable prep work.
Knowing about the major one-off expenses coming down the pipeline is crucial for marketing, finance, and accounting alignment. But trying to chase down updates in Slack messages, via email, or in person can slow you down.
Calendar systems like ClickUp, CoSchedule, or Monday.com give all necessary teams visibility into what the marketing team needs regarding vendors for upcoming events or collateral for product launches and announcements. The calendar serves as a timeline for confirmations and setting budget expectations, which can be accounted for as you approach your month-end close or forecast future closes.
Department heads know what tools and systems they need to be successful–and these tools and systems can be changed or updated between month-end closes. If finance and accounting miss out on conversations with department leaders over these updates, they end up with holes in the numbers. Automating purchase orders fills that gap.
Automating your procurement process with accounting systems like Accrualify streamlines organizing your accruals and accounts payable and promotes enhanced transparency and efficiency.
No one has perfected accrual automation. But these kinds of tools can help you get to follow-up conversations faster so you can clarify whether unusual purchase orders will be continual expenses that you accrued or if they’re one-time purchases to note and forecast for next month.
Revenue Recognition and ASC 606
Keeping track of revenue from product sales and services ensures that your business is on track with your forecasted ARR and sets you up for compliant tax filings later. Tools like SaaSOptics automate revenue schedules through CRM integrations and sync invoices to your general ledger chart of accounts structure so you can handle revenue recognition with minimal manual input.
Board Reports and Fluxes
Efficient month-end closes are the foundation for strong board reporting and insightful flux analysis. Inaccuracies and delays in the close will derail each of these processes, hurting your standing with investors as you struggle to explain the “why” behind your numbers.
You need to know exactly where things stand to offer accurate reports to your board leaders and executive suite. Vasco noted how Mosaic has been instrumental in building out quarterly board decks and running flux analysis to compare financials period over period.
Mosaic offers an analysis canvas that automatically aggregates finance and accounting data from multiple systems of record, so you can easily compare your budget versus actual spend for the month and inform future spend forecasting.
Mosaic Can Drive a More Efficient Month-End Close Process
No matter what your bespoke month-end close process looks like, data availability and integrity will make or break its effectiveness. If your accounting department is bogged down with manual data sorting and Excel spreadsheets, they’re bound to get caught in a vicious cycle of never-ending, backward-looking reporting.
Mosaic isn’t a close automation solution—but its ability to integrate data from all of your systems of record in real time satisfies those two prerequisites for better accounting procedures and an efficient month-end close process. With Mosaic in place, multiple steps in the month-end close become significantly easier, including:
- Sense-checking ARR numbers based on prior period revenue
- Running flux analysis and quickly creating explanations for discrepancies
- Reviewing operating expense accounts and identifying necessary reclasses
- Creating quarterly board materials
- Collaborating with executives and key stakeholders to review balance sheet statements, cash flow statements, and income statements.
If you want to learn more about how Mosaic helps finance and accounting teams assume a more strategic role in the business, reach out for a personalized demo. Or, download this month-end close checklist template and put yourself on the path to a 5-day close.
Month-End Close Process and Checklist FAQs
What should your month-end reports contain?
Monthly closing reports should contain financial reports divided into categories, such as:
- Operational data
Month-end reports should also contain a month-over-month comparison of important business metrics to evaluate performance comparing current month to the previous month.