Advice & Best Practice

Best practices for month-end and year-end close processes

Implementing best practices can streamline processes, reduce errors, and enhance overall financial management


Efficient month-end and year-end close processes are crucial for maintaining accurate financial records, ensuring compliance, and providing valuable insights for decision-making. Here are the best practices for month-end and year-end close processes.

Establish a clear closing schedule

One of the most important steps in achieving an efficient close process is establishing a clear and detailed schedule. This schedule should outline all tasks that need to be completed, assign responsibilities, and set deadlines. For month-end closes, aim for consistency by setting a standard time frame for completion, such as within five business days. For year-end closes, start planning well in advance, considering additional tasks such as audits and tax preparations. Communicate the schedule to all relevant departments to ensure everyone is aware of their responsibilities and deadlines.

Standardise procedures and checklists

Standardising procedures and using checklists can significantly improve the efficiency and accuracy of the close process. Develop detailed step-by-step procedures for each task, ensuring consistency and reducing the risk of errors. Create checklists for both month-end and year-end closes to ensure that all necessary steps are completed. These checklists should include tasks such as reconciling accounts, reviewing journal entries, and verifying financial statements. Regularly review and update these procedures and checklists to reflect any changes in regulations or company policies.

Reconcile accounts regularly

Regular account reconciliations are essential for identifying and resolving discrepancies early. Perform reconciliations for all key accounts, including bank accounts, accounts receivable, accounts payable, and inventory, on a monthly basis. This practice ensures that any issues are addressed promptly, preventing them from accumulating and complicating the year-end close. Use reconciliation software or tools to automate and streamline this process, making it more efficient and reducing the risk of errors.

Automate and integrate financial systems

Leveraging technology can greatly enhance the efficiency of the close process. Use accounting software that integrates with other financial systems, such as payroll, inventory management, and customer relationship management (CRM) systems. Automation can reduce manual data entry, minimise errors, and speed up the close process. For instance, automated workflows can route tasks to the appropriate personnel for review and approval, ensuring that all steps are completed on time. 

Additionally, consider using advanced analytics and reporting tools to generate accurate financial statements quickly.

Review and approve journal entries

Journal entries are a critical part of the close process, and it’s essential to review and approve them thoroughly. Establish a clear policy for creating, reviewing, and approving journal entries. Segregate duties to ensure that entries are prepared by one person and reviewed and approved by another. This segregation of duties reduces the risk of errors and fraud

Additionally, implement a system for documenting the rationale behind each journal entry, providing a clear audit trail.

Conduct variance analysis

Performing variance analysis helps identify and explain differences between actual financial results and budgeted or forecasted amounts. This analysis can uncover potential errors, unusual transactions, or trends that require further investigation. Conduct variance analysis regularly as part of the month-end close process and more comprehensively during the year-end close. Document the findings and take corrective actions as needed to address any issues.

Prepare for audits

Preparing for audits is a key aspect of the year-end close process. Ensure that all financial records are accurate, complete, and well-organised. Gather supporting documentation for all significant transactions, such as invoices, receipts, and contracts. Review the previous year’s audit findings and address any recommendations to improve the current year’s close process. Communicate with auditors early to understand their requirements and provide them with the necessary information promptly.

Review financial statements

A thorough review of financial statements is essential for ensuring accuracy and completeness. This review should include the balance sheet, income statement, cash flow statement, and statement of changes in equity. Verify that all accounts are correctly classified, and ensure that all necessary disclosures are included. Use analytical procedures, such as ratio analysis and trend analysis, to identify any unusual fluctuations or anomalies. The CFO or a designated senior finance professional should review and approve the final financial statements before they are published or submitted to regulatory authorities.

Communicate and collaborate

Effective communication and collaboration among departments are critical for a smooth close process. Encourage open communication between the finance team and other departments, such as sales, operations, and human resources, to ensure that all necessary information is shared promptly. Hold regular meetings to discuss the progress of the close process, address any issues, and keep everyone aligned. Use collaborative tools and platforms to facilitate information sharing and document management.

Continuous improvement

The close process should be subject to continuous improvement efforts. After each close, conduct a review to identify any challenges or bottlenecks encountered. Gather feedback from the finance team and other stakeholders to understand what worked well and what needs improvement. Use this feedback to refine procedures, update checklists, and implement new technologies or tools. Continuous improvement ensures that the close process becomes more efficient and effective over time.

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