How to Accelerate Your Month-End Close

Jake began by clarifying the core of the month-end close:

• Finalization of prior period accounting
• Monthly reconciliations of accounts
• Adjusting journal entries point
• Preparing timely and accurate financial statements
• Reviewing and reporting of financial statements

Whether operating under a cash, accrual, or generally accepted accounting principles (GAAP) basis, businesses need structure and discipline to generate meaningful reporting.

Why Month-End Close Matters:

A dedicated [month-end close] helps monitor performance against financial covenants, preventing breaches and maintaining good relationships with lenders,” Jake explained. For businesses with external investors, bank loans, or internal performance benchmarks, consistent month-end closing is essential for tracking financial covenants, managing risk, and avoiding surprises.

Benefits of a Tight Month-End Close:

• Financial Accuracy: Ensures that once the books are closed for a month, the results are final and unchanging, providing a clear picture of financial purchase.
• Decision Making: Accurate month-end close supports real-time sales and expense tracking, aiding in budget management and strategic decision-making.
• Governance and Oversight: A dedicated month-end close process enhances financial reporting governance and oversight, crucial for company management.

Jake emphasized how a well-run month-end close aids in tracking cash flow, supports internal governance, and empowers small businesses. “Cash is king for small businesses,” he reminded attendees, “And I talk to a lot of business owners still that just say, “Hey, as long as my cash balance is growing, and I have a good idea on our sales numbers…I’m good with it. My counterpoint to that would be: If your main concern is cash, if you started doing a month-end close and generating monthly financial statements, you can track your cash flow on an even tighter basis.”

13-Week Cash Flow Forecasting: This method involves tracking and forecasting cash flow for three months, providing a clear picture of financial health and aiding in decision-making.

Jake also tackled common barriers like departmental delays and lean accounting teams preventing an accelerated month-end close. His advice? Consider outsourced providers. He states that outsourced providers like Whitley Penn can “support the accounting team in place and do the month-end close because the other team members are handling their day jobs within the accounting department.”

Jake emphasizes the importance of maintaining regular oversight of financial data to detect fraud and manage risk effectively. He states that “having better control and visibility into your monthly numbers will keep you on top of an area that might be completely out of whack.” By closely monitoring monthly reports and expense accounts, businesses can quickly identify anomalies or unexpected spikes in spending that may signal deeper issues.

He highlights that without consistent attention to financial details, through practices like month-end closes, potentially fraudulent or erroneous activities can go unnoticed. “Maybe something nefarious was going on behind the scenes, but you’re really never [going to] know that until you start paying attention to your numbers on a monthly basis and have that month-end close.” The act of questioning unusual figures not only promotes accountability but also strengthens internal controls.