How To Streamline the Monthly Close Process: 6 Best Practices

Monthly closing is a vital part of financial management for any business. It provides a clear picture of your company's financial health, ensures accurate reporting, and serves as the foundation for informed decision-making.

However, many teams find this process overwhelming, struggling with data inconsistencies, missed deadlines, or tight turnarounds.

Below, we’ll explore six best practices to streamline your monthly close process, improve accuracy, and set your accounting and finance teams up for success.

What is the Monthly Close Process?

The monthly close process involves reviewing, recording, and reconciling all financial transactions at the end of each month, like finalizing account balances, reviewing critical transactions, as well as preparing the month’s financial statements.

This process is crucial for maintaining financial integrity, meeting regulatory requirements, and providing stakeholders with timely, reliable financial information.

However, it’s often riddled with challenges. 

Challenges in the Monthly Close Process

Common challenges in the monthly close process include:

• • Data inconsistencies: Often, individual departments use their own systems for recording data, leading to mismatches. For example, the sales team might record revenue at order placement, while accounting recognizes it upon delivery, resulting in discrepancies that require additional reconciliation efforts.
  • Manual errors: Data entry mistakes, such as typos or incorrect calculations, may seem minor yet have major consequences. For instance, entering $1,200 instead of $12,000—a one-digit typo—can lead to significant misstatements in financial reports, necessitating time-consuming audits to fix.
  • Lack of standardized procedures: When teams do not follow a consistent process for closing, it can lead to confusion and create extra work. For example, if one department typically submits expense reports without proper documentation while another requires detailed receipts, it would result in inconsistent reporting and extra time spent correcting it.
  • Inefficient communication: Poor communication between departments can delay the closing process. For example, if the finance team is not informed about significant transactions or changes in accounting policies, it can result in incomplete and inaccurate financial records and last-minute adjustments.
  • Inadequate technology: Outdated or insufficient software can hinder efficiency and accuracy. For instance, using manual spreadsheets for reconciliations instead of automated accounting software can slow down the process and increase the likelihood of manual errors.
  • Time constraints: Competing priorities can make it challenging to meet month-end deadlines. For example, if the finance team is also preparing for an upcoming audit, they may rush the closing process, leading to potential oversights and inaccuracies.

Let’s explore some best practices that can help you overcome these challenges and optimize your monthly close process.

6 Best Practices for the Monthly Close Process

The following best practices can help transform your monthly close process into a more efficient and less stressful experience. These strategies focus on improving accuracy, enhancing collaboration, and streamlining operations within your accounting team.

By adopting these practices, you can optimize your financial reporting.

1. Have Clear Roles & Responsibilities

Ambiguity can lead to mistakes and delays. Avoid it by clearly defining and communicating each team member’s roles and responsibilities related to the close process.

Specify:

• • Who prepares each report
  • Who reviews and approves each report
  • The resources and assistance each individual needs to fulfill their responsibilities

Make this delegation easier for your team to follow by planning ahead for obstacles. For example, if a key player is suddenly unavailable, who covers their responsibilities that month? Do they have the resources and training they need to do so effectively?

Encourage open communication and have regular check-ins with the team to identify and resolve potential issues. This can help you prevent last-minute scrambles that delay your close process.

2. Establish Repeatable Processes

Consistency is essential for an efficient monthly close. By following the same steps, your team can work more efficiently and reduce the chances of errors.

To add consistency to your close process, consider developing a standardized checklist of tasks that need to be completed each month, including reconciliations, journal entries, and review procedures.

Sync this checklist with a close calendar that outlines:

• • When each task should be completed
  • Who is responsible for it
  • What the review process entails

Together, these guides can help keep everyone on track and highlight any potential delays.

Strategic advisory services, such as those offered by G-Squared, can be invaluable in establishing and refining these repeatable processes. Experienced advisors can assess your current procedures, identify inefficiencies, and help design streamlined workflows tailored to your organization's specific needs.

3. Leverage Technology Securely

Using the right technology is crucial for an efficient and accurate monthly close process. However, it's equally important to prioritize cybersecurity when implementing these solutions. Invest in reliable, secure accounting software that automates many routine tasks while protecting sensitive financial data.

Look for features like:

• • Automatic bank feeds that pull data directly from your bank using encrypted connections
  • Recurring journal entries to automate regular entries with access controls
  • Integrated reporting tools with user authentication

Consider implementing a cloud-based system that allows for real-time updates and collaboration. This is especially beneficial if your team members work remotely or in different locations. However, ensure the cloud provider offers robust security measures, including:

• • End-to-end encryption for data in transit and at rest
  • Multi-factor authentication for user access
  • Regular security audits and compliance certifications

Additionally, implement cybersecurity best practices:

• • Regularly update and patch your accounting software
  • Train staff on recognizing phishing attempts and other cyber threats
  • Use strong, unique passwords and consider a password manager
  • Implement role-based access controls to limit data exposure
  • Perform regular data backups and test recovery procedures

By leveraging technology securely, you can streamline your monthly close process while safeguarding your financial information from cyber threats.

While implementing and maintaining these technological solutions can be challenging, many organizations find success in partnering with outsourced accounting firms, which often have access to the latest financial technologies. Their hands-on experience allows outsourced teams to provide expert guidance in technologies’ secure implementation and use.

This approach allows internal teams to benefit from advanced tools without the burden of managing the technology themselves.

4. Make Time for Leadership Reviews

Involvement from leadership is crucial for maintaining the integrity of your financial reporting.

If your workflow allows for it, regular review sessions with key stakeholders throughout the month allow for ongoing monitoring of financial performance and early identification of any issues.

These reviews should focus on key performance indicators (KPIs), which are measurable values that demonstrate how effectively your company is achieving its business objectives.

By addressing concerns promptly, you can avoid last-minute surprises and ensure a smoother close process.

5. Implement a Soft Close

A “soft close” process means performing many of your month-end tasks earlier. It might include:

• • Reconciling key accounts, such as bank accounts and major accounts like accounts receivable and payable mid-month. These accounts typically have a high volume of transactions, making them more susceptible to discrepancies. Early reconciliation allows you to catch issues like unrecorded checks, unrecorded customer payments, or misclassified expenses, giving you ample time to address these discrepancies before the final end of the month.
  • Reviewing significant transactions like large sales or expenditures ahead of time to ensure they are accurately recorded. By reviewing them early, you can verify that all relevant details—such as terms, conditions, and associated costs—are correctly captured. This proactive approach helps prevent potential errors that could impact financial statements.
  • Preparing preliminary financial statements, such as income statements and balance sheets, allows you to rectify potential errors. For example, you might review revenue trends for unusual fluctuations that could indicate recording mistakes. Addressing these issues early helps ensure that the final statements are accurate and reliable.

This practice has several benefits.

First, it gives you time to identify and resolve issues before the final close. With more flexibility before the deadline, the accounting team can investigate each issue more thoroughly, finding better solutions and improving the accuracy of your financial data.

Soft closes also allow you to spread your team’s workload more evenly throughout the month. This not only reduces the team’s overall stress, but also enables them to be more adaptable.

6. Empower Your Accounting Team

Your accounting team is crucial to the monthly close. Investing in their development not only supports their growth but also enhances overall efficiency. Support their development with regular training opportunities like:

• • Financial close management software: Offer hands-on workshops that focus on advanced features of your financial close or ERP software, such as automated workflows, real-time reporting, and data analytics tools that can streamline the closing process.
  • Advanced reconciliation techniques: Conduct training sessions on specific reconciliation tools and techniques, such as using exception reporting to quickly identify and address discrepancies and implementing batch reconciliation processes for efficiency.
  • Financial statement analysis: Lead your team in practical exercises that involve analyzing past financial statements to identify common errors or anomalies. Use the opportunity to teach team members how to use financial ratios and metrics to assess performance effectively.
  • Improvement methodologies: Introduce concepts like lean accounting or Six Sigma to help the team identify and eliminate inefficiencies, fostering a culture of continuous improvement.
  • Cross-training: Implement a structured cross-training program where team members can shadow each other in their roles, ensuring they gain hands-on experience and can step in seamlessly during peak times or absences.

Your team uses these tools and techniques daily, making them a valuable source of insight. Create a feedback mechanism—such as a suggestion box, survey, or retrospective meeting—to gather their observations on challenges and ideas for improvement.

Redesign Your Monthly Close Process with G-Squared Partners

Improving your monthly close process is vital for ensuring financial accuracy and supporting strategic growth. While the best practices outlined can help, many organizations benefit from the expertise of outsourced accounting services. Partnering with professionals gives you access to specialized skills and advanced technology, allowing your team to concentrate on key business initiatives.

At G-Squared Partners, we have helped numerous organizations streamline their closing processes. As your outsourced accounting partner, we can lighten your team’s workload and provide valuable insights. To learn more about how we can assist you in optimizing your financial operations, contact G-Squared Partners today.