How to Shorten Your Monthly or Quarterly Financial Close Process

September 28, 2022 ROARK

When it's time to close the books, small businesses must choose their methods and timelines to get the job done.

Closing the books can be daunting because it takes significant time and effort. Many people dread doing it.

When companies can't get financial information as quickly as they'd like, it's often due to issues with their close processes.

Streamlined close processes help a business deliver financial information quickly (and even faster than the industry). Improving those processes will save you a serious amount of time and money.

As finance and accounting (F&A) experts, our approach to the close processes at ROARK focuses on simplifying and shortening. 

We'll help you save time and resources bogged down by intensive closes. That's why we came up with 4 steps to follow for a short and straightforward close process, including our regimented order of tasks tailored for small businesses.


Step #1 – Determine Your Objective

Before you begin the financial close process, you and your team should determine the objective of the close. You can perform two types of closes, each containing different insights into your company's financial performance.


Soft vs. Hard Financial Closes

Financial closes are either soft or hard, depending on how much work goes into them.

Soft financial closes are shortened processes that only provide an overview of information rather than an intensive report. Companies use them for internal management reviews or in between quarterly or yearly closes.

These soft closes are how accountants can get back to their day-to-day work without spending a lot of time closing the books. Soft closes leave the books open so that financial information can be amended or added to later on but still provide helpful insights for managers making business decisions.

They're not very accurate, so be careful how often you use them. Soft closes give you a "snapshot" of your company's KPIs and still require error-checking and investigation of irregularities but leave out vital information like account reconciliations, inventory checks, and accruals of revenue and expenses. 

On the other hand -- hard closes are labor-intensive processes that involve a complete closing of the books so financial information about that period can't be changed later.

Hard closes are far more accurate and extremely important for businesses. It involves reconciling balance sheets and processing all financial activity from the given period. In doing this, accountants are marking the period as "closed," meaning no one can post more financial activity during it.

Companies use the information from hard closes to produce financial statements, perform audits, make internal decisions, and provide external reports to higher-ups, investors, and lenders.


How Often Should I Perform These Closes?

Many businesses perform soft closes every month, and hard closes every quarter and year. Companies that report to banks or investors do hard closes more often.

Ideally, you want to do a hard close every month, but for many companies, this isn't possible. Hard closes take tremendous effort and time from your accountants, so it's not always a wise use of time to do this every month.

For your small business, we recommend hard closes as often as possible, but at least once per year or quarter. Utilize soft closes to gain crucial financial information in between those hard ones.


Step #2 – Set a Timeline

The ideal time to spend on the soft and hard close processes depends on different factors like the size of your company, the complexity of its finances, and the use of automation.

An accounting survey by the APQC found that it takes businesses an average of 6.4 days to complete their monthly closes, with some taking up to 10 days.

Automation software has saved companies enormous time by doing manual tasks for them. Those tasks include data entry, cash flow analysis, and balance sheet certifications. 88% of companies that use significant automation for the close process get it done no later than 6 days.


How Long Should My Small Business's Close Process Take?

Most companies spend about 2-3 days on soft closes and up to 6 days on monthly hard closes.

That's a massive amount of man hours every month, especially for small companies. That's why many outsource their close processes to firms to take away some of the burdens. Outsourcing may be an excellent option if you're taking more than 7 days.

When it's time for you to start the close process, begin sometime before the first of the month. This is ideally 3 days prior. After 5 days or more, the task becomes too much.

As the close occurs, process everything internally in real-time to help you improve the timing for future closes.

There will be many opportunities for improving the more you go through the close process, but keep an eye on how specifically automation can benefit you.

Some other benefits of automating the close process are–

  • Increased morale: Employees will be more enthusiastic about the close process if they don't have to do the enormous amount of busy work that comes with it
  • Fewer errors: Mind-numbing work can leave room for mistakes, and automation ensures they happen a lot less
  • Better compliance: An automated system will allow you to see what data fields you need to enter, adhere to regulations, and create an audit trail.


Step #3 - Develop a Detailed Close Checklist

When you've decided when and what type of close, create a checklist of tasks that need to take place. Establish this checklist as a permanent procedure to shorten the closes you perform in the future.

Accuracy is essential for financial closes, so ensure the list sets you up for it by being organized and detailed to avoid confusion.

Hard closes involve the following tasks:

  • Assigning a project manager
  • Gathering of financial data
    • General ledger data
    • Balance sheets
    • Fixed assets
    • Accounts receivable and payable
    • Revenue totals
    • Inventory
    • Accruals
    • Petty cash amount
    • Bank and financial statements, and 
    • Income and expense amounts
  • Updating of accounts payable
  • Bank reconciliations
  • Review petty cash
  • Analyze fixed assets
  • Review inventory
  • Review and organize financial statements
  • Reconcile revenue and expenses accounts
  • Prepare financial statement
  • Make improvements for the next period

Soft closes skip over the following steps to provide a quicker yet less accurate statement:

  • Accruals and prepayments
  • Intercompany accounts reconciliation
  • Control accounts reconciliation
  • Revenue and works-in-progress (WIP) adjustments
  • Overhead allocations, and
  • Physical inventory counts

Many of those steps' information can be estimated using previous financial statements if you need to include them in the soft close report.


Step #4 - Complete Regimented Order of Tasks (The ROARK Method)

Now it's time to perform the close. 

If that list we just gave you is overwhelming, we get it. It's the drawn-out version of the hard close process.

We made a shortened method tailored to small businesses that removes a lot of the confusion so you can focus on getting the close done quickly.

Start by assigning an experienced project manager to your team. They are crucial for directing the close process and will ensure everything is done promptly and accurately.

Now, follow our regimented method for completing a financial close. When you're done, you'll have a clear picture of your company's finances and can determine if there's room for improvement or outsourcing.


1. Close sub-ledgers

Reporting your company's financial activities each period starts by closing your sub-ledgers, including the following areas:

  • Accounts receivable
  • Accounts payable
  • Payroll
  • Sales
  • Cash
  • Inventory, and
  • Fixed assets

To close these sub-ledgers, you have to adjust the account balances, taking them from a cash basis to an accrual basis according to the GAAP.

For accounts receivable in particular – it's imperative to reconcile the total of unpaid customer billings to the one in the general ledger. This process ensures the accuracy of the accounts receivable's figure when closing the books, which can save a lot of confusion and frustration in fixing errors with misreported payment times.

The same goes for the totals of every sub-ledger. They provide key insights into your company's finances and accounting, or F&A, but only if they match the general ledger.

Accuracy is essential to your business's financial success.


2. Make adjustments and complete journal entries

Journal entries are records of business transactions consisting of a debited amount and a credited amount.

A typical journal entry will look like this:


Account Name

Transaction Date










Accounting adjustments are types of journal entries that amend ones that were previously posted. For example, if you billed a customer and haven't received their payment yet, then the journal entry of that transaction needs to be adjusted if the payment isn't coming in until the next accounting period.

That process works under the GAAP that expenses should be recorded in the same period as their related revenue.

When your journal entries are complete, you can transfer any leftover money to an income summary account. That closes the sub-ledgers and wipes their accounts "clean" so you can start over with a new financial period.


3. Make estimations

With the journal entries complete and books closed, you can move on to future plans.

Part of looking to the future is estimating how long current projects will take to finish. Managers need to see how much money has come out compared to the projected end date to make budgeting decisions.

Begin with a list of everything that needs to be completed, including all communications, like meetings. You may already have this list from when you initially organized the project.

Order that list into steps. Provide a loose estimate of how long each step will take. It will then be a good time to review or assign deadlines.

Don't forget to involve your co-workers, especially the ones directly involved in the project. Create a team to help you analyze ongoing projects and agree on how long each step will take.

Before making final estimations, incorporate the possibility of unplanned events into the equation. Make room for sickness, impromptu meetings, supply delays, and any other mishaps that can get in the way of project completion.


4. Analyze Data

After the books are closed, you can look closely at the numbers and gather insights.

One key thing to analyze is the comparison between the budget vs. actual numbers. When you make a budget, you know that the actual amount spent isn't going to be static and would end up falling somewhere (hopefully) near the original budget.

Closing the books lets you see exactly where the actual numbers stand compared to your budget. You can then restart the period with a fresh perspective on your progress and a better understanding.

Analyzing the close process findings has other benefits as well:

  • Tax deductions: Since there are so many ways businesses can find deductions, you could be saving a lot of money by analyzing your journal entries
  • Fraud detection: Scouring the books makes it a lot more challenging for fraudulent activity to go unnoticed
  • Outsourcing opportunities: If your company is taking longer than 6 days to finish the close process, you'd benefit greatly from outsourcing your accounting and finance department to us

Now that you've successfully closed the books and analyzed the data, you're ready to start the month, quarter, or year with new insights and data on your company's progress.


Using Templates to Close the Books

Now that you know our tried-and-true method for closing the books for your small business, it's time to simplify it further.

Templates allow companies to enter necessary data without creating their own worksheets. Some provide a workable timeline for you to follow as well.

Not all of the worksheets only provide data entry, they also provide analysis prompts to get you started on interpreting your close data to make new projections.

One type of close template is a General Ledger Accounts template. There are thousands of them on the web to choose from.

Using templates, you can reconcile accounts like the G/L, organize them by month and account number, and streamline the close process across the board.

Other types of close process templates are:

  • Expense report templates
  • Profit and loss templates
  • Bank reconciliation templates
  • Billing statement templates, and
  • Balance sheet templates

These templates will help simplify your financial tracking and cut off time from the close process.

Training Your Team

Getting your accounting and finance team ready for closing isn't just about training them on their respective duties.

Your team needs to know they're a part of something bigger. Something bigger is achieved when the company successfully manages its F&A and can reach its goals.

Train every staff member on the entire process from end to end. Their impact on the effort will become apparent as they perform their roles.

Make sure to train them on the timeline, too. Employees need to know the exact deadlines of close activities so everyone is on the same page and understands their importance to the overall project.


Getting It Done

If it's not already, make financial closure a sacred time for your F&A teams. The process should be all they're focused on until it's done, and only genuinely critical mission work should interfere.

With their allotted time outside of closures, your F&A team can dedicate themselves to helping their business partners across the organization.

Lastly, don't delay or extend the close process if you can help it. The longer you wait, the longer mistakes go unchecked, and finances go without proper analysis.

Our rule here at ROARK is that closes should take about 3 business days with a significant F&A resource -- otherwise, five business days should be the benchmark.

If your company goes beyond 7 days to complete the close process, that's a good sign that you're understaffed and need extra help.

That's where outsourcing comes in. 


Outsourcing F&A Through ROARK

We understand how confusing and time-consuming financial closes are. Even if they're done consistently, these closes might not be done accurately or on time.

Because of these issues, you could be losing time and money.

Improving your financial close process is possible with a bit of innovation. You can transform a monumental process that leaves your team overworked into a highly-organized and automated system that benefits the organization.


Get in touch with us to streamline your company's financial close process. We include this support in our Finance & Accounting as Service. 

We'd be happy to help you put the right controls in place for your business, so your financial closes are as efficient and informative as possible.

Transform your financial closes from something dreaded into sacred processes carried out by your F&A team.

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