How To Close Your Books Faster and More Accurately

Nothing feels more jarring than coming to accounting close-cycle time and realizing your bookkeeping and finances are a mess. Whether your financial close processes are monthly, quarterly, or annually, your goal is to verify transactions, balance accounts, and organize incoming cash and outgoing expenses.

However, this important business process becomes trickier when transactions are uncategorized, accounts are disorganized, and internal accounting teams find it difficult to prioritize the close-cycle.

For accounting professionals, data governance policies, a shift to automated processes, and adopting a continuous accounting mindset can help streamline your workflow. Using insights from Gartner, this article outlines methods for closing your books faster and more accurately.

What is the accounting close-cycle process?

The accounting close-cycle process occurs at the end of a certain time—often monthly or quarterly—to reset and verify account balances. Ideally, you're verifying and documenting each transaction from that period and preparing your financial data for the next.

Also called "financial close," it's an important practice that rectifies and keeps key financial statements and documents up-to-date. These financial ledgers help measure progress against sales and business goals, support cash flow projections, and allow leadership to measure spending against the budget.

For small businesses, the accounting close cycle is critical. While many SMBs deal with cash flow issues, it's important to have accurate ledgers and balanced accounts. With smaller teams and fewer resources, SMBs might struggle with dispersed data, a lack of standardization, and manual processes, which can extend the accounting close-cycle process, leading to inaccuracies.

How to close your books more efficiently

Streamlining the accounting close-cycle is crucial for financial health, yet it's often challenging and time-intensive. But if you fail to do so, your disorganized data can complicate timely book closures. Not to mention, relying solely on human teams increases the risk of errors, especially when under pressure.

Standardized accounting procedures are essential for accurate and uniform reporting across departments. Here are tips for more efficient book closures.

Tip 1: Improve your data quality by prioritizing a data governance strategy

Data governance strategies establish clear accounting policies for intercompany processing, including roles and responsibilities. [1] These strategies promote accuracy and consistency across departments and business units.

Maintaining uniform accounting strings for intercompany accounts and categorizing transactions consistently facilitates clear accounting, transfer pricing, and reconciliation. The table below shows an example of standardized accounting string for intercompany accounting [1]:

Tip 2: Shift from manual to automated processes

Solely relying on human effort to categorize and manage thousands of transactions across multiple books is often a recipe for disaster. Especially if teams are under tight deadlines, errors can likely happen. Instead, businesses should shift to automated processes that utilize platforms and software to provide real-time categorization and automatically balance accounts.

To make this switch to automated processes, SMBs can leverage tech tools: 

• Expense management software can create automated rules that categorize repetitive transactions. 

• General ledger software keeps a continuous tally of money that comes in and out. 

• Reconciliation software helps with transaction matching throughout various company accounts. 

Small businesses might want a combination of integrated platforms, or you may want to search for an all-in-one solution.

Tip 3: Better prepare for each close-cycle with a continuous accounting mindset

Instead of a mad dash at the end of the period, small businesses should adopt a continuous accounting mindset that includes continuous reconciliation and organization before the financial consolidation period. [1]

Reconciliation should happen continuously instead of right before closing, and leadership can establish fixed dates for deadlines for cash reconciliation. Daily or weekly consolidation helps reduce the amount of work needed at the end of the close cycle and can provide adequate time for chasing down inaccuracies, receipts, and missing data.

Benefits of closing books faster and more accurately

The three tips above will help you get your accounting team on the right track. But if you need more convincing, consider these benefits:

Improved internal productivity

A messy close-cycle can distract internal teams, decreasing productivity and allowing other tasks to fall by the wayside. Instead of controllers and accounting teams focused on high-level, strategic initiatives, they are bogged down by tracking down transactions and balancing ledgers. Especially if you're working with monthly close-cycles, eventually internal teams will constantly be playing catch-up and working against the clock to close books promptly.

Improved financial accuracy

When internal teams aren't rushed, and automation processes are there to reduce the manual workload, small businesses experience improved financial accuracy. With improved financial accuracy comes a slew of benefits like confidently projecting sales, knowing exactly how much cash is on hand for a certain investment, investing in new equipment, and accurately hiring new employees. Small business leaders can rest assured that they're making major business decisions based on accurate numbers and balances.

More collaborative working relationships

Instead of chasing down transactions, accounting and finance leaders can foster strong working relationships with other departments. They can become key voices of reason and strategy when it comes to business decision-making, and other departments will appreciate clear and timely guidelines for submitting data. Teams can improve cooperation and coordination, streamlining data access and ensuring all authorized users in the accounting department have access to the necessary tools and information.

Increased visibility

When books are closed on time, businesses can quickly identify negative trends and patterns that are affecting their organization and customers. This information is at their fingertips in a near real-time manner, allowing leaders to pinpoint problems and quickly deploy solutions. Leadership also has more time to review data and trends, reporting to investors or other strategic partners.

Maintain a pulse on profitability 

Positive cash flow is the lifeblood of most businesses, and accurate, timely books are key to understanding how revenue is flowing in and out of your business. With many small businesses operating on slim cash margins, it's incredibly important to maintain a pulse on your business's operating profitability.

Close your books faster while minimizing errors

Accounting close-cycles are critical for small business activities in that they produce accurate and timely records of the business's health and financial performance. At different points of the year, it's important to close out books on time without causing unnecessary complications. By embracing consistent data governance, shifting to automated processes, adopting a continuous accounting mindset, and pushing aside non-critical work, finance teams can work smarter to close out books.

These close-out reports and practices create key financial data and reports that allow the business to make decisions and investments, project sales and cash flow, and continue day-to-day operations.