How to Effectively Streamline Your Startup Month End Close Processes

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A stitch in time saves nine. That’s especially true when it comes to the month-end close process for startups. Startups often operate with limited resources and rely heavily on correct financial records to make informed decisions. But by following a clear and consistent monthly closing process, they can make smarter decisions, save precious time and money on bookkeeping and tax filing, and ensure their business stays afloat in the long run.

This article will discuss the stages involved in closing the books at the end of each month and offer a deeper understanding of the month-end closure process. Along the way, we’ll talk about some of the best practices for startups looking to streamline their approach and offer some handy tips for pinpointing areas that could use a little sprucing up. By the end of this article, you’ll have a solid grasp of the importance of the month end closing process and how it can give your business the financial tune-up it needs.

What Is The Month-End Close Process?

The month-end close process is a significant accounting procedure that involves reviewing and finalizing all financial information to be reported and filed at each month’s end. This process includes recording and reconciling all business transactions, reviewing accounting data, and ensuring that all financial information is accurate and complete for the month. This procedure can be done by gathering all financial data for the month, such as bank statements, income and expenses, savings accounts receivable and payable, inventory, fixed assets, invoice payments, accruals, prepayments, and general ledger data.

month end close

Credits: Flogast

The nature of the month-end close process differs depending on the accounting basis used by the company;

  • Cash basis accounting realizes revenue and expenses when money changes hands and doesn’t consider any outstanding receivables or payables.
  • Accrual basis accounting considers all transactions, irrespective of money exchange. It acknowledges revenue and expenses as they occur, irrespective of the timing of payments made or received.

The accounting method a business chooses depends on its particular needs and situation. Accounts such as debtor accounts and creditor accounts will not exist in a company that implements cash based accounting. The month-end close process varies based on the unique accounting method used by each business. That said, it generally entails a procedure that records all financial transactions that took place during the previous month.

Significance Of Optimizing Month-End Close Procedure For Startups

Closing the month’s books is crucial for business growth, ensuring strong cash flow, streamlined financial planning, strategic decision-making, tracking progress toward long-term objectives, and effective management of the petty cash fund. By finalizing the month-end close process without delay, startups founders can have the following benefits:

  • Find discrepancies in your accounts and highlight areas that require improvement in your financial activity.
  • Enable well-informed business choices by swiftly addressing concerns within your company.
  • Efficiently conserve time and resources with streamlined bookkeeping.
  • Experience a seamless year-end close without stress.
  • Simplify tax filing, making it more manageable.
  • Monitor all transactions your business conducts on a monthly basis.
  • Create accurate and up-to-date financial records.

The Steps Of The Month-End Close Process

Closing the books at the end of the month can be a daunting task for businesses, but it is an important step toward supporting accurate financial records. Month-end close process is crucial for maintaining correct financial records and making informed business decisions. By following these steps and ensuring that your documents are accurate and up-to-date, you can set your business up for success.

components of month end close

Credit: Stampli

Step 1: Preparation For The Month-End Close Process

During the preparation phase, you should gather and organize the necessary financial information and collect various data points about the accounting period. Following is the month-end close checklist to ensure that nothing is missed during the financial accounting process:

  • Cash: Adjust for outstanding checks/deposits and undeposited deposit funds from the previous month to match the bank statement balance.
  • Inventory and Fixed Assets: Accurately record and account for depreciation and outdated/expired stock.
  • Accounts Payable and Receivable: Search for unused credits or past-due amounts that need to be wiped off.
  • Notes Payable With the Bank: Analyze amortization plans and keep track of monthly interest expenses.
  • Intercompany Accounts: Ensure payables and receivables match between both businesses and check for prepaid expenses.
  • Accrued Payroll: Reimburse employees as needed.
  • Accrued Taxes: Account for all property, sales, and payroll taxes.
  • Expenses: Track all expenses, including those for supplies and maintenance costs.

It is not necessary to complete the checklist in order, and some tasks may be delegated to another department based on the nature and size of the organization.

Your daily operational transactions must be documented, ideally in real-time, rather than waiting for the month’s end. After establishing a month end closing checklist, it is essential to set up a consistent timeline for closing the books and assigning responsibilities to the accounting team.

You can also Implement accounting software or systems in the accounting department that can provide better accuracy and efficiency, making the process smoother and faster. This will save you time and effort when closing the books at the end of the month.

Step 2: Reconciling Accounts

In the accounting world, systems comprise different accounting modules that serve specific purposes. Reconciling these accounts is a crucial aspect of accounting that involves comparing various financial records to ensure they match. During the month-end close process, it’s important to reconcile all of these components together.

Accounts Receivable

To review your accounts receivable, create aged debtors’ reports (outstanding invoices owed to a business by its customers, categorized by the length of time they have been due) and follow up with customers who have exceeded their credit period. Don’t forget to factor in discounts and credit notes related to disputes or returns, and be sure to acknowledge any bad debt for clearer comprehension.

Accounts Payable

To review your accounts payable, Create aged creditors report (a financial document that displays the amounts a business owes to its suppliers or vendors, categorized by the length of time the invoices have been outstanding), mark past-due bills for quick payment, and prevent making repeated payments. Review for errors like duplicate invoices and proactively negotiate improved credit terms if extended payment periods are needed for suppliers.

Bank Accounts

Bank statements must be regularly compared with accounting records to ensure that all transactions are correctly recorded and accounted for. This comparison process can help identify discrepancies that must be resolved, ensuring that the financial records are up-to-date and accurate.

Credit Card Accounts

Reconciling credit card statements with accounting records and verifying and categorizing expenses are crucial for accurate financial reports. This process helps prevent errors and ensures transparency by categorizing expenses into appropriate accounts.

Review all of your invoices and payments. Double-check everything to ensure that all of your transactions have been cleared. This attention to detail can save you from potential financial mishaps.

Step 3: Reviewing Financial Transactions

Next, you should review all your financial accounts, ensuring they’re shipshape and up-to-date. During this process, it’s essential to verify the accuracy of each transaction and confirm that it has been properly categorized. Please keep your eyes peeled for any errors or inconsistencies and promptly correct them to avoid issues.

Additionally, don’t forget to scrutinize recurring transactions to ensure they are still valid and identify any that may no longer be necessary.

Analyzing unusual or suspicious transactions can help detect potential fraud or other financial irregularities, allowing for prompt action to be taken. By reviewing financial transactions regularly, individuals and organizations can maintain financial accuracy, transparency, and accountability, helping them make informed decisions and secure a sound financial footing.

Step 4: Adjusting Journal Entries

Adjusting journal entries are an important aspect of financial reporting, allowing businesses to update their accounts for previously unrecorded transactions or to correct errors.

Depreciation And Amortization

Fixed assets like machinery, property, plant, equipment, and vehicles are necessary for a company’s long-run growth. It is necessary to note that fixed assets often depreciate over time. To effectively evaluate your fixed assets, follow these simplified steps:

  • Make sure to keep a record of all fixed asset purchases, sales, and any improvements that have been made.
  • Include depreciation and amortization costs as well as any additional costs for maintenance and repairs.
  • Examine the condition of your fixed assets to ensure they are operating well.

Inventory Adjustments

Conducting a monthly inventory count is a crucial part of your closing process. Through this approach, you can identify the ideal timing and reorder points for maintaining your inventory. Additionally, it will help you spot perishable items or products in need of replacement more easily.

During the month-end close process, it is recommended that you follow these steps in regard to your inventory:

  • Conduct an inventory count to determine the number of goods on hand.
  • Review and update the inventory figures in your accounting records to reflect the accurate amount of inventory you have.
  • Review your inventory management process, including how much inventory you typically hold, how frequently you order, and the cost of goods sold.
  • Evaluate your storage methods to ensure that your inventory is properly stored and that there are no issues with loss, damage, or theft.

Besides Fixed assets and inventory following adjustments should also be made:

  • Accruals; Accruals are made for expenses or revenues that have yet to be recorded, such as interest or wages.
  • Prepaid Expenses; Prepaid expenses are also adjusted for using the prepaid asset during the reporting period.
  • Deferred Revenue; Deferred revenue adjustments recognize revenue earned in a future period.
  • Payroll Adjustments; Payroll adjustments include accruals for wages and taxes payable at the end of a reporting period.
  • Other Adjustments as Needed; Other adjustments may include bad debt expenses or corrections to previously recorded transactions.

Step 5: Preparing Financial Statements

During this phase, compile your financial statements, encompassing balance sheet accounts, income statements, and cash flow statements.

Creating financial statements necessitates the aggregation of your general ledger, income statements, and balance sheets. You may either manually assemble the data using a spreadsheet or automate the process using the software. These documents give you insight into your spending habits, return on investment, and budgetary issues.

Carefully arrange your financial statements to locate them quickly whenever you need them. Most accounting software has features built-in to help with this task. Having your financial statements organized and readily available will save time and avoid stress during the month-end close process.

Step 6: Closing The Books

Upon completing the month-end close process, pertinent documentation is assembled and submitted to senior management for evaluation. This is an important step because the person reviewing the closing documents is not directly involved in the closing process and can look at everything with fresh eyes, which can help identify any errors or inconsistencies that might have been overlooked during the closing process.

Once upper management has reviewed and approved the closing documents, the previous month is considered “set in stone,” and no new transactions can be recorded on it. This guarantees that the financial statements are correct and trustworthy for reporting needs. It also offers a distinct beginning point for the finances for the next month.

Step 7: Ongoing Enhancement Of The Month-End Close Procedure

Reflecting on your experience during the month-end close process, you can find future opportunities for development. What have you discovered this month regarding closure? How can you simplify the process for next month?

Start by creating a financial calendar that includes important deadlines for tasks such as collecting all transactions, recording new reports, posting income and expenses, and adjusting the ledger. Make sure everyone is aware of this timetable by communicating it to other team members participating in the process. Remember to adjust the calendar as necessary to accommodate your schedule.

Recommended Accounting Platforms For Startups

As startups grow and become more complex, managing finances becomes more challenging. However, there are several accounting systems out there that may assist you in efficiently managing your company’s money. Here are five widespread choices:

QuickBooks Online


QuickBooks Online, a popular option for startups, offers an array of features that assist businesses in handling their financial affairs. The platform includes invoicing, expense tracking, and inventory management capabilities. QuickBooks Online is cloud-based, allowing users to access their financial information from anywhere, and offers a range of integrations to connect with other business tools.



Xero is another robust accounting platform that enables firms to handle their money from any location. The platform offers features such as invoicing, bank reconciliation, expense tracking, and integrations with other business tools. Additionally, Xero provides team members with collaboration tools so they can work together on financial projects.



FreshBooks is a user-friendly accounting platform offering time-tracking, invoicing, and project management features. The platform is designed to be intuitive and easy to use, making it a good choice for startups that may need a dedicated finance team.



Wave is a free accounting platform offering invoicing, receipt scanning, and bank reconciliation features. Although it is a free platform, it still provides many useful startup tools. Wave also offers payroll and credit card processing features for an additional cost.

Zoho Books

Zoho Books

Zoho Books is another accounting platform that offers customizable features and integrations. The platform includes features such as invoicing, expense tracking, inventory management, and integrations with other business tools like CRM software. Zoho Books also offers mobile apps for on-the-go financial management.

SOPs For The Month-End Process

The closing procedure for each month often feels a little hectic. But by using the right techniques, following these SOPs simplifies the month-end close process and ensures that your financial data is accurate and up-to-date.

  1. Prioritize Accuracy Over Speed: Focus on ensuring that all financial data is accurate before closing the month’s end. With ten days post-month-end to submit closing details, use this period to verify the accuracy of the data.
  2. Manage Time Effectively: Set daily and weekly goals for your teams to meet your deadlines. This will help them stay on track and serve the month-end close process more efficiently.
  3. Encourage Cross-Functional Collaboration: Ensure your finance and accounting teams understand every aspect of your business, including who is responsible for what. This will enable them to communicate with the right people and get the necessary information for the month-end process.
  4. Foster Good Relationships: Develop strong relationships with individuals in your business who collect and report financial data. This will make it simpler to compile data and, if necessary, provide recommendations.

Frequently Asked Questions (FAQs)

How Long Should A Month-End Closure Procedure Take?

Time management is a critical aspect of the month-end closure process. Organizations should strive to leverage technology and adopt efficient procedures to shorten the duration of the process while maintaining accuracy and completeness. The duration of the month-end closure procedure can vary depending on various factors, including the complexity of financial transactions, the size of the organization, and the level of automation in the accounting processes. It is advised to set aside around 10 days after the month ends to finish the month-end closure procedure.

What Distinguishes A Month-End Close From A Year-End Close?

A month-end close updates financial records for a single month, while a year-end close is a more comprehensive process that finalizes annual financial statements, closes temporary accounts, and makes necessary adjustments. The main differences are in frequency, scope, timing, and reporting.

How Do You Prepare Month-End Accruals?

To prepare month-end accruals, follow these steps:

  1. Collect all unpaid invoices from accounts payable.
  2. Check with all departments for any invoices that they may have.
  3. Estimate the amount to be paid for each expense.
  4. Categorize the invoices based on their account numbers.
  5. Debit the expense accounts and credit the accrual accounts for each invoice. Repeat this process for all the invoices.

What Are Some Common Pitfalls And Challenges Associated With The Month-End Process?

  • Gathering financial data from various sources can be inefficient and challenging
  • Financial data often comes from disparate sources, which requires cleaning and turning into a consistent format
  • Coordinating the work among different departments involved in financial data can be a bottleneck
  • In the final days of a month, bigger enterprises might face intricate interdependencies that are challenging to unravel.
  • Staying up to date and maintaining awareness of your position on the checklist can be a demanding task.

Wrapping Up

To the uninitiated, various aspects of accounting can feel quite daunting – but it doesn’t need to be. Hopefully, this article helps steer you toward more diligent processes, and by keeping an eye on areas for improvements, startup owners can streamline their month-end close process, ensuring the long-term success of their business.

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About the author: Shanzae Solangi

Shanzae Solangi is an enthusiastic content writer with expertise in SEO and keyword research. Her bachelor’s degree in Clinical Psychology mixed with her adept writing skills allows her to successfully enter into the targetted audiences’ mind and create content that could help companies generate leads. Shanzae’s adaptable skills, eagerness for learning and communication skills are the reason for her quick success in the world of content writing. Besides creating powerful content that drives companies' online growth, she holds an administrative role, managing and overlooking several different websites.

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