Ways to Make Monthly Closing More Efficient

While companies generally place great importance on preparing annual financial statements due to their legal obligations, monthly financial statements often take a back seat. Either the resources for the additional effort are lacking, or the need for them is not recognized. Yet monthly financial statements are anything but superfluous: They make it possible to identify negative trends in an organization’s financial situation at an early stage and form the basis for further financial statements. Although preparing them requires monthly work, in the long run this can save time—especially during the annual financial statement preparation phase.

Furthermore, the monthly closing process itself doesn't always have to be time-consuming. Through internal optimizations, automation, or outsourcing certain tasks, it can be made more efficient—we'll show you how.

What is the monthly closing?

Monthly financial statements are a subset of annual financial statements that provide a clear summary of a company’s financial figures for the past month. They consist of various reports, which may vary depending on the company’s needs. Typical components include the monthly balance sheet, income statement, and cash flow statement.

The preparation of monthly financial statements involves several steps. First, all incoming and outgoing invoices are recorded, categorized, and entered into a journal that documents all business transactions. Next, an account reconciliation is performed, during which all transactions are compared with the corresponding account movements to ensure the accuracy of the entries. Next, assets and liabilities are reviewed, including the identification and documentation of assets such as fixed assets and cash.

The final step is to prepare the reports. To do this, the monthly sales figures are first transferred from the accounting accounts to the general ledger and closed out there. The resulting balances are then included in the income statement and balance sheet.

Benefits of a Fast Monthly Closing

Since monthly financial closings are not required by law, there are no mandatory deadlines. Although they often serve as the basis for the advance sales tax return—which many companies are required to file monthly—they generally have up to six weeks after the end of the month to do so, thanks to the frequently granted deadline extensions.

Nevertheless, there are many reasons to keep the period between the end of the month and the completion of the monthly financial statements as short as possible. A so-called “fast close”—that is, closing the books within up to five business days—offers organizations several advantages: 

Early Error Detection: The sooner the monthly financial statements are available, the sooner errors in the financial data can be detected and corrected. This minimizes the risk that discrepancies will affect other processes or future financial statements and lead to more significant problems.

Basis for Current Decision-Making: Monthly financial statements prepared promptly provide financial data that is up-to-date and therefore particularly meaningful. This enables company management to identify opportunities and risks early on and respond to them as quickly as possible.

Thorough Performance Evaluation: A fast close ensures that the impact of corporate strategies on the financial position can be assessed in a timely manner and based on reliable data. This allows for the objective measurement of performance and the analysis of variances.

Building Trust with External Stakeholders: Monthly financial statements are not only important for internal purposes but can also benefit external stakeholders, such as investors. Up-to-date figures enable them to realistically assess a company’s financial position. Furthermore, prompt preparation of financial statements signals to external parties that the organization manages its financial processes efficiently and reliably. This can strengthen their trust.

Even though it offers many benefits, some organizations find it difficult to implement a fast monthly close. A 2022 study by Ventana Research, a leading enterprise technology research and consulting firm, shows that only 53 percent complete their monthly close within six or fewer business days after the end of the month. With the right measures in place , significantly more companies could achieve this goal.

Opportunities for Optimizing Internal Processes

One way to increase efficiency is to optimize internal processes. A well-structured workflow can speed up the monthly closing process

An important factor here is the standardization ofall necessary accounting processes. This means that all tasks involved in the monthly closing should be carried out according to clearly defined standards. Everyone involved must be fully familiar with the guidelines, including the sequence, scope, and assignment of responsibilities. Without such a structure, unnecessary effort is expended each month on reconciliation and planning. 

The principle of standardization also applies to the submission of documents. All supporting documents should be in the same format and collected in a central location to facilitate easy transfer into the accounting system.

To help you put standardization into practice, we’re providing you with our free checklist for the month-end closing process. It gives you an overview of all the necessary steps and allows you to complete them systematically.

A fixed schedule can also help shorten the time it takes to prepare the financial statements. Since data from various departments must be compiled for the monthly financial statements, each department should have a binding deadline for providing its information—ideally, one to two days before the final financial statements are due. This allows sufficient time for follow-up questions or corrections, thereby avoiding delays.

It’s also a good idea to start making preparations early in the month. This includes, for example, regularly monitoring financial information by performing mid-month account reconciliations. This allows discrepancies to be identified early on and resolved more quickly by the end of the month.

Automation of the Financial Closing Process

Automating parts of the monthly closing process offers another opportunity for process optimization. This is achieved using specialized software solutions, which today are often based on artificial intelligence (AI) and handle routine tasks such as data entry or journal entries. According to a study by the consulting firm PwC Germany, 89 percent of the companies surveyed expect to achieve efficiency gains in their closing processes through the use of such technologies. This potential is also reflected in their expectations regarding further digitization: 58 percent anticipate that the level of automation in their closing processes will reach at least 40 percent within the next five years. This could allow them to benefit from the following advantages:

Less time required: By automating recurring tasks, they are completed significantly faster than when done manually. This reduces the need for staff, and the resources freed up can be allocated to other areas.

Greater accuracy: The risk of human error—for example, when transferring data or performing calculations—is minimized. In addition, automated systems validate data in real time, which enables more precise financial statements and helps ensure compliance with regulatory requirements.

Greater employee satisfaction: By automating routine tasks, employees can focus on more varied, strategic tasks. This increases their motivation while reducing the stress caused by time pressure and having to manually handle errors during closing processes. 

However, automation also comes with its own set of challenges. Selecting and implementing software requires not only time and financial resources but also employee training so that staff can use the new tools efficiently. Even after implementation, regular training is necessary to ensure that the team can keep pace with ongoing technological developments. When and to what extent the monthly closing process should be automated therefore depends on the specific circumstances of each organization. 

Companies that want to automate processes in their monthly closing must first analyze which areas are particularly time-consuming or error-prone and therefore require high priority. They must also define the goals they aim to achieve by introducing new technologies in the identified areas.

The next step is to select appropriate software. It should meet the company's specific requirements and, ideally, be compatible with existing systems.

Next comes the implementation of the software solution. During this process, it is important to keep employees regularly informed about upcoming changes. The sooner and more accurately they understand how these changes will affect their day-to-day work, the more likely they are to accept the implementation.

After implementation, continuous monitoring of the processes is necessary to identify and resolve potential problems early on. In addition, regular checks should be conducted to ensure that the previously defined goals are being met. If this is not the case, the causes must be identified and the process optimized again. Given the rapid pace of technological advancement, regular adjustments are also essential to achieve the highest possible efficiency.

Outsourcing the Financial Statement Preparation Process

Instead of making internal adjustments, there is also the option of outsourcing the monthly closing to service providers. One way to do this is to work with external accountants. Alternatively, tax advisors can also handle this process. 

Outsourcing monthly financial closing offers the following benefits, among others:

Meeting Time Targets: External service providers are contractually bound to fixed deadlines and have the necessary resources and experience to prepare the monthly financial statements on time. Compared to in-house processing, which can be delayed by illness or staffing shortages, outsourcing offers a predictable and highly reliable alternative.

Cost savings: If the monthly financial statements are prepared externally, there is no need to hire additional staff for this task. This eliminates expenses for recruitment, salaries, and training. Payment is made only for the services actually rendered.

Reducing the workload on the internal team: By outsourcing the monthly closing process, employees who were previously responsible for it can devote their time to more value-added tasks. This enables them to contribute more significantly to achieving the company’s goals.

Expertise in Automation: Many organizations still rely on manual processes that are prone to errors. However, the transition to digital tools requires time and resources. Because they work with a variety of companies, external service providers are typically familiar with numerous software solutions and their automation capabilities, allowing companies to benefit from advantages such as time savings and error reduction when outsourcing, without having to implement systems on their own.

Availability of Expertise: Given the shortage of skilled workers, many organizations find it difficult to recruit qualified staff for their finance departments. External service providers bring a wealth of experience and extensive expertise to the table, enabling them to ensure that monthly closings are carried out properly.

Nevertheless, in some cases it may make sense from a cost perspective to handle the monthly closing in-house, especially if there is already a high degree of automation within the company. However, if the workload increases significantly—for example, due to company growth—or if the necessary resources are lacking, outsourcing can provide significant relief.

To outsource month-end closing, you must first select a suitable service provider. Next, a contract is drawn up that serves as the basis for the collaboration and covers both the scope of services and the deadlines and cost structures.

Once the contract is signed, the service can begin. All relevant data must be provided to the external service provider so that they can begin recording financial transactions and prepare the monthly financial statements on time. 

The collaboration will then be reviewed on a regular basis to ensure that the established standards and deadlines are met. If necessary, adjustments can be made to further optimize the process.

Conclusion

The timely preparation of monthly financial statements can be a key factor in a company’s success. To meet established deadlines, the process must be designed as efficiently as possible. Whether this is achieved through internal adjustments or by outsourcing to external service providers—in both cases, automation plays a major role. While traditional optimizations often address only individual problems, automation enables a holistic solution that can accelerate the entire closing process. Therefore, the level of automation in monthly financial closings is expected to increase in the coming years.

In a global study conducted in 2024 by Sage, a provider of accounting software, 98 percent of the companies surveyed stated that they expect the use of AI to improve their monthly closing processes over the next five years. Fifty-four percent anticipate an efficiency gain of 20 percent or more. Fifty-three percent of respondents even believe that automated systems could completely replace traditional monthly closing processes by 2030. AI thus has the potential not only to optimize closing processes but to completely redefine them.

A major advantage of this technology lies in its ability to analyze and evaluate large amounts of data in real time. Technological advances will make it possible to harness this potential even more fully in the coming years. In light of these developments, the Sage study predicts that by 2030, approximately 75 percent of companies will move away from traditional monthly financial closings and instead establish dynamic, continuous reporting systems. This would allow them to gain real-time insights into their current financial situation at any time and respond even more flexibly to changes.

To benefit from these developments and remain competitive in the long term, companies should start early to automate their financial processes and prepare them for future technologies.