Why a Timely Month-End Close Matters—and How to Make It Faster

By the time your management accounts arrive, how much of the next month has already happened?

You may have approved spending, hired someone or committed to a project before seeing a clear picture of the previous month’s performance.

A timely month-end close gives you reliable numbers while there is still time to act. It helps you investigate changes in margin, understand costs and assess whether the business is performing as expected.

Getting there starts with how finance works throughout the month.

Reliable numbers give you more time to act

Imagine having reviewed financial information on working day two instead of working day five.

You could investigate a fall in profitability sooner. Question an unexpected increase in spending. Give your board more time to consider the results before its next meeting.

The IFRS Foundation’s financial reporting framework recognises timeliness as a characteristic that improves the usefulness of financial information. Information needs to be available while it can still influence decisions. Although the framework concerns general-purpose financial reporting, the principle is relevant to management reporting too.

Source: IFRS Foundation, Conceptual Framework, paragraph 2.33 (opens in a new tab)

Accuracy matters just as much. A report delivered early loses value if leadership must then work through corrections and revised figures.

The aim is an earlier view of performance that management can trust.

Why does month-end take so long?

A number of substantial tasks come together at month-end: final reconciliations, accruals and prepayments reviews, cut-off checks and adjustments. These need attention before the numbers are ready for management.

The workload increases when routine posting reviews, corrections and missing information have also been left until the month ends. Tasks that could have progressed earlier then compete with work that genuinely depends on the period closing.

Different systems can add another layer of complexity. Finance may need to gather and combine information from several sources before preparing management accounts and the board pack.

ICAEW has highlighted how repeated downloads, copying, rekeying and corrections can make month-end reporting laborious, and how automation can improve the process.

Source: ICAEW, Financial Modelling: Automating Month End (opens in a new tab)

Together, these demands create a bottleneck. Completing suitable preparation and reviews throughout the month can ease that pressure, leaving more capacity for the final accounting work and checks.

Make consistent data part of the routine

The way transactions are recorded affects how much work is needed later.

An agreed posting framework helps recurring transactions receive consistent treatment. Supplier-to-account-code mappings provide a starting point, with review for purchases that require different treatment.

Consistent tagging captures the details needed for reporting, such as department, project or business unit.

Automated exception reports can highlight missing information or unexpected posting patterns for investigation.

These disciplines help finance identify issues earlier and reduce the need to reconstruct information when reporting deadlines are approaching.

APQC’s close guidance similarly recommends advance preparation, clear task ownership and consistent processes. It cautions against shortening deadlines without understanding the work and information required.

Source: APQC, How Can You Improve the Month-End Closing Process? (opens in a new tab)

Bring information from disparate systems together

Your accounting system may hold the financial records, while payment platforms, customer systems and operational tools hold other parts of the picture.

When those sources remain disconnected, reporting can become a monthly exercise in downloading files and combining spreadsheets.

Bringing data from disparate systems into one central warehouse creates a consistent reporting foundation. Finance can bring information together without rebuilding the same reports each month.

The warehouse still needs reliable source data, consistent definitions and checks that information is complete and reconciles appropriately.

ACCA and KPMG’s Performance Reporting: An Eye on the Facts emphasises the importance of consistent data structures and governance. Published in 2015, its discussion of these foundations remains relevant to the design of dependable reporting.

Source: ACCA/KPMG, Performance Reporting: An Eye on the Facts (opens in a new tab)

For leadership, the benefit is a clearer, more connected view of business performance.

Get the reporting sooner, too

Completing the close is one milestone. Getting the reporting into management’s hands is another.

If reviewed numbers are ready but the board pack takes several more days to assemble, the business is still waiting for the information it needs.

Connecting reviewed data to automated management accounts and board packs helps reduce that additional preparation.

Automated report generation is distinct from continuously updated or finalised accounts. Reports can use approved month-end figures, with their availability dependent on completion of the necessary close and review work.

Is your month-end process holding you back?

Ask three questions:

• Where does work accumulate during the close?
• Which routine checks could happen throughout the month?
• How long does it take to turn reviewed numbers into management reporting?

The answers can reveal where changes may make a practical difference.

Propella brings senior finance expertise, disciplined processes and connected data together to help growing businesses get useful numbers sooner.

Explore our outsourced finance department service, or talk to us about your month-end close.