Month End Close Process: Keys to Build Streamlined Operations

Binita Thakker
5 min read
Month End Close Process: Keys to Build Streamlined Operations

Each month, businesses must undergo an accounting month end close process to verify business account balances, identify and solve for any discrepancies, and produce monthly financial statements which shed light on the financial health of a business or organization.

Bookkeepers and accountants usually start the monthly close after a month ends, which means business leaders must wait 2-3 weeks after the end of the month to receive their financial statements and results of the past month—leaving little time for thorough review, investigation, or course correction.

Streamlining the month end close process can help startups run a more efficient, timely, and accurate monthly close process. In this article, we’ll cover five key steps to streamlining your month end close and discuss how your organization can benefit from these adjustments.

How to Streamline Your Month End Close

There are a number of tips, tools, and processes you can implement to help streamline your startup’s month end close process, alleviating some stress from your finance team and delivering more accurate and timely financial updates to your executive team.

1. Clearly Articulate Why a Faster Month End Close is Important

One of the key steps a startup founder or finance team lead should take to streamline the month end close is to define and share why this is important for the business.

Your “why” is the reason behind wanting to streamline the month end close. A faster month end close process can benefit a startup in a number of ways, including:

  • Faster access to financial data 

  • Identify potential financial trouble spots early

  • Present financial information timely and accurately to investors, lenders, and external stakeholders

  • Understand operating results in a timely manner

  • Avoid accounting staff working “overdrive” at end of month, preventing probability of errors and/or omissions

  • Maintain up-to-date financial records

  • Minimize probability of undetected errors or fraud

Once you’ve defined the “why” of a faster month end close, share it with your entire organization — not just those in the finance department. While your marketing director doesn’t categorize transactions or file paperwork with the IRS, they are a stakeholder in the business’ finances. You need them to understand that when a request comes from the finance staff, they need it within the requested time-frame, not when it’s convenient.

Having your entire team on board in supporting a faster month end close is an important first step of the process.

See also: What is Accounting and Why is it Important for Startups? 

2. Standardize Your Month End Close Procedures

Your month end closing process happens every month, meaning it’s an iterative, repeatable process. By standardizing your procedures, you can streamline your month end close tasks and make your company operations more efficient.

There are four key steps to standardizing your month end close procedures:

Step 1: Take Stock of Your Month End Close Steps

The first step in making your financial close processes iterative and efficient is to take stock of all the steps you complete each month.

As you go through a month end closing process, write down each step you take, the stakeholder that’s involved with that step, and when it must be completed; be sure to include recurring journal entries and third-party reports/documents. 

By identifying the who, what, and when of each step, you’re documenting the mechanics of the process and, in turn, creating a comprehensive and clear list of steps to completing a month end close.

Step 2: Identify Dependencies

A major frustration for completing a faster month end close cycle is inter-office dependencies. The finance department isn’t a closed system and often needs to source documents and information from employees in other departments.

As you’re building your month end close checklist, start watching for dependencies. When you spot a dependency, plan out how long it will take for them to gather and share the necessary accounting data.

Include these dependencies on your month end close checklist and add a little extra time for connecting and checking in with those decision-makers. External sources and vendors might also be obstacles for getting the information you need. Include on the checklist who you need to ask, when you need the data by, and how long it will take to get the data. 

Bonus points if you communicate these monthly deadlines to the stakeholders and can put it on their calendar as a recurring reminder. You’re more likely to get follow-through when everyone can plan ahead and collaborate.

See also: 5 Best Practices for Corporate Credit Card Management 

Step 3: Work Backward From Your Target Month End Close Date

Once you’ve written out all of your steps for a month end close and added how long each task takes to complete, work backward from your target month end close date. This little bit of magic math gets you to the start date for beginning your month end closing process.

Step 4: Build Your Month End Close Checklist

The month end close checklist allows your finance team to streamline the month end close process and minimize inefficiencies across the organization, quickly becoming part of your finance team’s standard operating procedures. 

These robust checklists should include a who, what, and when for each step. Meeting the deadline for each step of your checklist will ensure a faster and more streamlined month end close for your company. Plus, following a consistent approach to monthly close, as laid out in the checklist, makes onboarding and training new accounting personnel a much easier process.

See also: Startup Bookkeeping: Common Mistakes VC-Backed Startups Make and How We're Solving Them 

3. Perform a Month End Close Post-Mortem

There’s no better way to learn than from past mistakes. Consider your month end close checklist a living document that’s updated each month.

After the finance team has completed the month end close, you want to do a simple review of how the process went by doing a post-mortem. A post-mortem of historical performance allows your team to diagnose what went well and what didn’t, provides an open forum to share feedback, and helps the team brainstorm ways to course-correct for future months.

Consistency is key with post-mortems. Each time you review your process, you get to improve it. These changes can help your team to maintain a continuous improvement mindset and to further improve and streamline the month end close activities.

See also: What To Expect From Most Bookkeeping Price Packages (& A Better Solution) 

4. Practice Continuous Close

An accounting process that waits for the month to end to start the monthly close process is not setting startups up for success. 

At Zeni, we perform daily bookkeeping on behalf of our customers to ensure startup founders can stay on top of their business finances on a daily basis via their Zeni Dashboard. This practice is often referred to as a continuous close. A continuous close is the practice of closing the books over the course of the month rather than waiting until the month officially ends. A continuous close can help your company avoid financial delays and stay ahead of potential financial issues.

Businesses of all sizes and stages can benefit by implementing a continuous close process, which unlocks financial data paramount to decision making as soon as possible, enables business leaders to course-correct and make adjustments based on up-to-date financial data, and more.

And, of course, continuous close helps speed up the monthly close process and streamline the financial reporting process.

See also: AI Bookkeeping: The Future Of Accounting For Business 

5. Automate As Much As Possible

When it comes to a faster month end close, automation is key. Automation improves the speed and accuracy of traditionally slow, labor-intensive, and repeatable tasks such as data entry, account reconciliation, and attaching customer and vendor invoices/receipts to transactions.

When you replace manual processes with intelligent, effective automation, you allow your finance experts the flexibility to focus their time on critical tasks that require analysis, strategic thinking, and uniquely human skills. 

Incorporating automation into your monthly close process does not necessarily require engineering resources. Start by taking full advantage of the various integrations and APIs supported by modern accounting software to begin automatically updating your general ledger with key transaction data and documentation from your bank records and credit card accounts, bill pay portals, invoicing tools, and expense management platforms

See also: 5 Best Banks for Startups Compared: SVB vs Mercury vs Brex Cash vs First Republic Bank vs Wells Fargo 

Let Zeni Streamline Your Startup’s Monthly Close

With a seamless blend of artificial intelligence and a team of human finance experts at Zeni, we’re able to close our clients’ books within 5 days of month end. Plus, founders can track key insights such as runway, burn rate and opex—in real time, every day—via the Zeni Dashboard.

Our finance professionals perform daily bookkeeping in compliance with GAAP guidelines and industry standards to ensure you have 24/7 access to the most up-to-date financial results of your startup. 

Zeni works with more than 100 startups across every vertical to manage their day-to-day finance functions (including invoicing and payable management), perform fast and accurate monthly close, assist in tax preparation and filing, provide CFO-level guidance and insights, and more for a flat monthly fee.

Learn how Zeni’s AI-powered finance concierge for startups can take your finance management to the next level —sign up for a demo today.

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