You’d never show up to a race expecting to win first place without training. That’s no way to set yourself up for success. You’d start a strict training regimen months in advance, outline how many miles you need to run each week, and track your progress along the way.
Companies can apply the same concept to their financial performance. Every year, organizations keep clear revenue targets top of mind. They use historical data, evaluate their current workforce, and create a yearly plan to achieve these objectives. However, like any trained runner, finance teams don't wait until the end of the year to measure progress. They track success consistently to stay on track.
In fact, part of the finance team's role is to periodically monitor the company's performance to ensure consistent growth, alignment with plans, and course-corrections as needed. One approach that gives business owners a holistic financial overview is establishing an efficient month-end close process.
This necessary financial reporting process involves collecting, cleaning, and organizing financial data for a specific closing period to see how the company is performing. Although it’s a staple principle for finance teams, it’s tedious and time-consuming. Thanks to modern practices and new accounting software tools, finance teams have the resources to speed up these processes and dedicate more time to strategic work.
Below, we’ll dive into the ins and outs of month-end reporting and share tips to streamline your monthly closing process.
What is the Month-End Close Process?
By closing the books and reviewing monthly expenses, finance teams can check transactions, reports, journal entries, and other data while matching income and expenses to financial records. This ensures they account for and review receipts, invoices, and other business transactions. While industry benchmarks suggest optimal close times of three to six business days, 50% of finance teams require six or more business days to complete their monthly close processes.
The month-end close process adjusts and verifies account balances through monthly reporting. It helps organizations gain deeper insight into their financial health. Many companies require month-end financial reports so senior management can track how the company’s performing month over month.
A striking 75% of accounting professionals report that they must reopen their books after the close to fix errors, indicating systematic quality issues in financial reporting. These statements also maintain records for budgeting season and [year-end close](https://www.abacum.ai/blog/close-fiscal-year-jorge-lluch).
When done correctly, the month-end close process gives leadership deeper insight into overall spend management. They can pinpoint where the company is overspending or underspending, then better allocate the financial budget to optimize spending.
Learn more: Take control of your planning process: How the best business budgeting software can help
What are the Different Steps Involved with the Month-End Close Process?
Because every company is different, there’s no single month-end reporting process for all business owners. Still, all companies must verify account balances, fix budget inconsistencies, and create financial statements. Below are the main steps to month-end reporting.
1. Compile and classify all transactions
Before starting the analysis, you need all financial information. The finance team compiles accounts receivable, accounts payable, and all monthly transactions before proceeding.
2. Bank reconciliations
Next, accounting teams match and verify each monthly transaction to ensure there are no discrepancies. Reconciling all accounts on the balance sheet gives executives better visibility over their cash flows for the current period.
3. Evaluate fixed assets
After finishing bank reconciliations, evaluate fixed assets. Fixed assets include equipment, furniture, vehicles, and other resources that help a business operate and generate revenue. Finance teams review the depreciation schedule of these items and recategorize them as expenses.
4. Create financial statements
After completing the month-end close, the final step is preparing financial statements. Required month-end financial statements include:
Balance Sheet – The Balance Sheet shows how much money a company has at the beginning of the month compared to what it spent during the month. It also includes liabilities (debt) and equity (ownership).
Income Statement (P&L) – The Income Statement shows how much profit a company made during the month. It also shows how much money remained after paying off debt and shareholders.
5. Close with a complete review
Finally, analyze results from the previous month. Typically, higher management conducts another overview to catch any errors in the reports. At this stage, the reviewer checks for consistency and accuracy before closing the month-end process.
In 2024, 61% of CFOs have implemented FP&A software, representing a dramatic increase from just 19% in 2023.
Common Month-End Close Challenges
Finance leaders face several challenges during the month-end close. These include:
Manual data compilation
Limited collaboration
Last-minute adjustments
Month-End Close Checklist
Collect and review all financial documents.
Reconcile accounts and verify balances.
Review accruals and adjust entries.
Finalize financial statements for management review.
How to Speed Up your Month-End Closing Process
After reviewing the accounting procedures that must take place, it’s clear to see how these steps can become taxing for any finance team to complete on time. Here are a few ways you and your team can improve your month-end close process.
1. Embrace the power of automation
Automating processes is one of the best ways to reduce the work required to close the books. By automating monthly bookkeeping tasks, finance professionals free up time for strategic activities like analyzing trends and improving operations.
Today, many automation tools let finance teams automate manual tasks tied to the month-end close. This approach not only improves data accuracy and speed, but also gives leadership faster insights for more strategic business decisions.
2. Use technology to consolidate data
One of the biggest roadblocks is slow, manual data collection. Finance teams spend a considerable amount of time gathering and consolidating data from multiple tools before inputting that information into spreadsheets.
By the time they've collected the data, it’s already outdated. Consider implementing an automation solution that instantly pulls data into a centralized space, so everyone involved in the month-end close can align and access information from a single source of truth.
3. Work to improve efficiencies within the finance function
One of the most effective ways to improve the month-close process is to boost efficiency. With a clear process in place, finance teams can assign ownership, set deadlines, and deliver accurate reports month over month.
Automation technology provides quick data access for finance teams. Having financial planning and analysis software not only speeds up the month-end close but also improves efficiencies across the entire organization.
4. Take advantage of real-time data
Accessing real-time data speeds up the month-end close. With up-to-date information, you’ll quickly identify issues and correct mistakes as they arise.
For example, if an error occurs when preparing the income statement, the finance team can quickly spot the line item causing the issue. Once corrected, they can rerun the report without delay.
5. Improve collaboration
To successfully close the books, it’s vital to collaborate with all budget owners. Finance teams should communicate with other departments to build a shared understanding of the business.
A well-defined plan ensures everyone knows what to do and how to meet deadlines on time.
Improve Your Month-End Financial Reporting with FP&A Software
As a finance professional, you’ve got plenty on your plate. You need accurate accounting data to create detailed reports that support strategic decision-making. To eliminate manual data entry and repetitive tasks, consider implementing financial planning and analysis software that can revamp your monthly accounting processes.
By consolidating data into a centralized solution, you won’t worry about data inaccuracies or hours of manual work. With this advanced technology, you and your finance team can create month-end reports in a fraction of the time.
Considering adding a strategic tool to your finance tech stack? Contact our team at Abacum today to find out how to get started.
By addressing these common month-end close challenges, following a clear checklist, and using modern FP&A software, you’ll streamline the close process and support better financial insights for your organization.
