Why closes run long
The usual diagnosis is understaffing. The usual actual cause is sequencing — starting the P&L review before the balance sheet is reconciled, so every discovered error means redoing work already done.
A close is a dependency chain. Cash reconciles before AP, AP before accruals, accruals before the P&L is meaningful. Run it in order and ten days is comfortable for most businesses under $20M.
Days 1–3: cash and reconciliation
Nothing downstream is trustworthy until cash is right, so this phase blocks everything else.
- Reconcile every bank account to the statement — zero unexplained differences, not "close enough"
- Reconcile every credit card and line of credit
- Clear payment processor holding accounts: Stripe, PayPal, Shopify, Amazon each settle net of fees and need gross-up
- Investigate every stale outstanding item over 60 days
- Confirm the prior month's ending balances still match — if they moved, someone posted to a closed period
The rule that saves the most time
Lock the prior period before starting the current one. Retroactive postings to closed months are the single most common cause of numbers that will not tie, and they are entirely preventable with a close date in your accounting system.
Days 3–5: payables, receivables, payroll
- Enter all vendor bills received, including those dated in the period but arriving after
- Reconcile the AP aging to the balance sheet control account
- Reconcile the AR aging and flag anything over 90 days for a reserve discussion
- Post payroll including employer taxes, and reconcile to the provider report
- Accrue any payroll period spanning the month end
Days 5–7: accruals and adjustments
This is the phase that separates a real close from a bank-feed export, and it is where cash-basis habits show up as distortion.
- Accrue expenses incurred but not yet billed — contractors, legal, cloud infrastructure
- Amortize prepaid expenses: insurance, annual software, retainers
- Post depreciation and amortization
- Recognize deferred revenue for the period and tie the remaining balance to the schedule
- Reconcile inventory and post COGS if you carry stock
- Record accrued interest on any debt
Days 7–10: review and report
Everything up to here was preparation. This is where the close produces something a human can act on.
- Run a full balance sheet reconciliation — every account supported by a schedule, no exceptions
- Review the P&L against budget and prior month, and explain every variance over your materiality threshold
- Check margins by product or segment for anything that moved unexpectedly
- Have someone who did not prepare it review it
- Lock the period
- Distribute statements with a short written commentary — the numbers alone are not the deliverable
The review step is not optional
Self-reviewed closes catch mechanical errors and miss judgment errors. If your team is too small for a separate reviewer, that is the strongest argument for an outsourced controller — independent review is the whole product.
Getting from 20 days to 10
If your close currently runs long, these four changes account for most of the improvement.
- Move work earlier in the month — vendor bills can be entered as they arrive, not all at once
- Automate bank and processor feeds so reconciliation starts from a matched position
- Set a materiality threshold and stop investigating $40 variances
- Write the checklist down and assign an owner per line, so nothing waits on someone noticing it