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Closing The Books Monthly vs Quarterly

"Do any companies close the books only at quarter end instead of every month? What are the ups and downs of doing that?"

This question was asked at a recent webinar, now available on-demand: "7 Keys to a Fast Close - Save Resources and Time for Improving Results"

Please add your thoughts about it below. Thanks!

Answers

Jon Paul
Title: President
Company: Value Added Finance Resources
(President, Value Added Finance Resources) |

As accounting software has gotten easier to use, I find quarterly financials are a dying breed. However, there may be some smaller organizations, nonprofits in particular, that may still be doing their books once a quarter.

It only makes sense when there is very little activity taking place. Not much time is being saved. The downside is with the increased volatility these days, a lot can change within a quarter. An organization's management, board and/or advisors would want to know what's going on and be able to act on a timely basis.

I know of one organization that intended to close monthly, but struggled. It was very frustrating for the board. They knew the cash position, but that didn't tell the whole story. A lot of money was left on the table- like timely billings, collections and opportunities to reduce costs.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I really don't know of any business (except one's that do accounting on the back of a napkin or Excel) that don't do some type of monthly close.

While longer periods soften variance in the numbers, monthly is how we as a society do operate; thus it makes sense to know where you are on a monthly basis.

Also monthly allows you the ability to catch-up for timing differences by accruing good estimates so that your numbers don't vary widely from reality.

Topic Expert
Philip Boken
Title: Principal Advisor & Founder
Company: PCB & Company
(Principal Advisor & Founder, PCB & Company) |

Closing monthly is typically the norm, though it is surprising how often private companies in the middle market are not able to achieve this. The value goes beyond precision and the accuracy of information for the sake of accounting. Having accurate, timely financial information is critical to support decision making.

Additionally, companies that struggle with a monthly close tend to be the ones who continue to have "surprises." Companies that don't or can't find a way to close monthly often don't have their reconciliations or variance analyses current, and when they do complete them, they find issues that have resulted in financial loss.

Companies that are able to efficiently close their books monthly tend to have a detailed checklist of tasks that they use to keep the activities on track. Software such as Blackline is also a valuable tool for tracking the close, including reconciliations.

Feel free to contact me for ideas.

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