Methods to Close Your Books Faster

This is not rocket science and you have all thought these same methods through, but they deserve a discussion to keep you focused on producing a faster month-end close of your financials.

Ways to Speed Up Your Close Process:

  • Accrue whatever you can! - Some vendors can be very slow to provide their invoices each month and if you can’t close your AP process timely this can kill your month-end close timing. If you have expenses or vendor costs that are relatively consistent, you can create a recurring expense accrual that you book each month to capture these average costs. In the next month, you can book any adjustments to actual costs as they should not be materially different.

  • Month-End Close Task Checklist - It is critical that you have a detailed month-end close task checklists that shows which team member is responsible for each required part of the close with the due dates based on the days before or after the month-end date. Click here for our month-end close checklist that you can download and customize to fit your close process. It has many standard close tasks that nearly all companies utilize with proposed due dates based on the final day of the month.

  • Month-End Close Calendar - The monthly close calendar is also critical and helps your team members visualize the due dates of their deliverables based on a calendar that is very helpful for them to plan out their month. Click here for our pre-built calendar that you can download and customize to match your specific close process tasks. It already includes standard month-end tasks that most companies will already benefit from and you can build around it.

  • Accounting (GL) system - Is your accounting system slowing you down because you have outgrown it or it is not the right system for your company? If so, you should consider the cost/benefit of replacing it. The proper system at the right cost for your budget can make all the difference to your accounting and reporting efficiency. See our Accounting System Decision Matrix Tool to help you decide if there is a better system out there for you.

  • Cash vs. Accrued Sales - If your systems are not supporting an accurate accrued sales number that is producing a clean AR roll-forward (see roll-forward templates) then you should consider moving back to a cash based sales recognition. You can keep all other costs and expenses on accrual but move sales to cash without any audit issues as it is actually more conservative then accrued sales. Once you have a better sales and billing recognition system, you can move back to accrued sales but this can save days off of your month-end close.

  • Key Account Reconciliations - Consider the benefit of only completing the critical account reconciliations before closing your books and then the staff can follow up on the rest of the account recs after the close and adjust them for the next month-end close. The key account reconciliations that should not be delayed are below. Click here for our balance sheet acct. templates.

    • Bank recs

    • AR & AP Agings

    • Prepaid Assets

    • Accrued Liabilities

  • Accounts Payable - I know it sounds counter intuitive but sometimes you really do have to call your vendors to ask them to send you timely invoices. If you have a vendor that is very slow to bill and you have the approximate information to accrue their bills, then by all means accrue them. However, if you have certain vendors with inconsistent charges (usually inventory related) you may need to reach out to them to make sure they are timely billing you so you can confirm the charges. This is not as big of an issue if you are on a full purchase order system as your system will be able to approximate the charges once you receive the order. This relates back to the section of how strong your financial systems are.

  • Recurring Entries and Estimates - Similar to accruing expenses, you can also create recurring entries based on volume if your business or industry supports this kind of reasonably consistent activity. If so, you can create recurring entries for more items, close the books and then true up the activity in the following month. Bad debt accrual is an example of a formula based entry that most companies employ during the month as the actual write-offs could occur months in the future. What we are recommending here is applying this type of formula entry in a more extensive way to speed up your close.

Each company is different and not all of these methods will work for everyone and there may be specific methods related to your company or industry that could speed up your close that are not even covered here. The crux of the idea is to always be thinking of ways to record your income and expenses as accurately as possible while meeting the matching principle (expenses matching costs) but as efficiently and quickly as possible in order to be able to report your companies financial statements in the most timely manner possible while still maintaining material accuracy.