Month-end close: how to finish faster with less effort

Key takeaways

The month end close process is the routine of finalising a month's accounting records so reliable figures can be produced. It drags when work that could be done daily is saved for the end. Moving bank matching, invoicing and receipt capture into the month, and using a fixed checklist, lets most small businesses close in about five working days.

• Do daily what you now save for month end.
• A fixed checklist with owners and dates removes the scramble.
• About 5 working days is a realistic target for a small business.
• Late figures cost more than the hours: decisions are made blind.

What is the month-end close?

The month-end close is the set of accounting tasks carried out after a month finishes to make sure every transaction is recorded, accounts are reconciled and the figures are accurate. The result is a profit and loss account and balance sheet the owner can trust.

• How BPO can help businesses reduce operational costs
• In-house vs outsourced bookkeeping: the cost compared

Why does it take so long?

It takes long because a month of small jobs is done in a few days, by people who are also doing their normal work. Receipts are missing, invoices have not been raised, bank lines are unmatched and queries have to be sent to colleagues who have forgotten the detail.

• Transactions recorded in batches, not as they happen.
• Missing receipts and supplier invoices.
• Sales invoices raised late.
• Reconciliations left for the end.
• No fixed list, so steps are remembered differently each month.

• The eight wastes of lean in an office, and how to cut them
• The cost of manual processes, and what to fix first

What does a slow close cost?

A slow close costs the hours spent on it and the value of the information arriving late. In an illustrative firm, the close takes 12 working days. The owner sees March's figures in the third week of April, and any problem in them has been running for seven weeks.

Shortening the close to 5 working days gives the same figures a week and a half sooner. The effort usually falls too, because work done daily takes less time than work reconstructed from memory.

• Cost of delay: what waiting costs a small business
• Time spent on manual reporting: what it costs

How do you close faster?

Close faster by spreading the work across the month and fixing the order of what remains. The principle is that month end should be a check, not a catch-up.

• 1. Match bank transactions daily or weekly.
• 2. Capture receipts and supplier invoices as they arrive.
• 3. Raise sales invoices on completion.
• 4. Set a cut-off date and tell the team.
• 5. Follow the same checklist every month.
• 6. Review what slowed you down and fix one cause.

• How to reduce debtor days and the cost of waiting for cash
• Three-way matching: stop paying invoices you should not
• Process standardisation: one best way, lower cost per task

Which steps can be handed over?

The preparation can be handed over: transaction coding, bank matching, supplier statement checks, chasing missing documents and preparing reconciliations. Review, judgement and sign-off stay with your accountant or finance lead.

A managed team in an earlier time zone can also complete each day's processing overnight, so the books are current every morning.

• The follow-the-sun model: work that moves on overnight
• How to reduce back-office costs in a UK small business

What should not be rushed?

Do not rush reconciliations or skip review to hit a date. A fast close with errors is worse than a slow correct one, because decisions and tax filings rest on it. Company accounting records must be accurate and kept for six years, and late filing of annual accounts carries automatic penalties.

• False economy in business: when the cheap option costs more
• Right first time rate: the quality number that cuts cost

What does this look like in practice?

A pattern we see in small finance teams: the first week of each month is lost to the close, and the bookkeeper spends most of it asking colleagues for receipts. Collecting those documents through the month, by a simple photo-and-send routine, removes the chase and with it most of the delay.

• See client work
• BPO Solutions for UK businesses

Month-end close checklist

A basic list to adapt with your accountant.

• All sales invoices raised and sent.
• All supplier invoices and receipts entered.
• Bank and card accounts reconciled.
• Debtors and creditors reviewed.
• Payroll and VAT accounts checked.
• Unusual items queried and explained.
• Reports produced and reviewed with the owner.

• Budget variance analysis: why actual costs miss the plan
• Cost reduction KPIs: the numbers that prove savings are real

Next step

Tell us how many working days your close takes and who does it. We will show you which tasks can move into the month and which could be prepared for you.