Key takeaways
- While the books are being closed, management cannot see the problems. The goal is to reduce waiting without lowering quality.
- Find the critical path of the closing tasks first, because speeding up work that is not on that path will not make the close finish any sooner.
- Move work forward to before month-end, use materiality when estimating, and assign an owner and a deadline to every task.
A company that finishes its June close in mid-August is managing with data more than six weeks old, like a doctor who hands a patient blood test results after the symptoms have already changed. The numbers may be correct to the last baht, but they arrive too late to help decisions. When margin leaks or receivables start to stretch, the owner finds out after two cycles of leakage.
The right number of closing days depends on the complexity of the business, the number of companies in the group and the systems used. A business does not necessarily need to chase the 3-5 days of a large corporation. A more reasonable goal is to reduce the time every quarter, until management has the figures in time for the next month's meeting and there are not many reversing adjustments.
Why the close is slow
| Cause | Symptom | Solution |
|---|---|---|
| Documents arrive late | Waiting for invoices and requisitions from site | Announce the cut-off in advance and set up accruals from POs |
| All tasks run in sequence | Each person waits for the previous one | Separate out the tasks that can run in parallel |
| Reconciling everything once at month-end | Old differences have built up | Reconcile bank accounts weekly or daily |
| Intercompany balances do not match | Has to be chased and fixed every month | Net off balances before the close and use a single party as the originating recorder |
| Chasing small differences | Losing a day over a difference of a few thousand baht | Set a materiality threshold for the monthly close |
Example: finding the critical path
A hypothetical example, counting working days from the tasks and the order in which they must wait for one another, where the current report is issued on the 20th of the following month.
| Task | Waits for | Before (days) | Done by day | After (days) | Done by day |
|---|---|---|---|---|---|
| Accruals and payables | - | 3 | 3 | 1 | 1 |
| Inventory and cost of sales | Payables | 3 | 6 | 2 | 3 |
| Revenue and cut-off | - | 2 | 2 | 2 | 2 |
| Intercompany | Revenue, payables | 1 | 4 | 1 | 3 |
| General ledger review | All tasks | 2 | 8 | 2 | 5 |
| Report preparation | Review | 1 | 9 | 1 | 6 |
The actual work takes only 9 days, yet the report is issued on the 20th. The rest is waiting for documents and waiting for people. If the close were completed by the 6th, margin leaking at THB 0.6 million per month (1.5% of THB 40 million revenue), or about THB 20,000 per day, would be spotted 14 days sooner, equivalent to THB 0.28 million per leakage cycle. This is a simple count using a 30-day month.
Closing calendar
- 3-5 days before month-end: announce the cut-off, clear outstanding requisitions and confirm intercompany balances
- Month-end: stop accepting documents and record the stock count or goods received
- Days 1-2: reconcile bank accounts, record payroll accruals and revenue
- Days 3-4: cost of goods, depreciation and intercompany
- Day 5: the controller reviews the variance analysis
- Day 6: send the report to management, together with a log of issues to fix next cycle
Speed up, but do not cut controls. Monthly estimates can be used where there are criteria and the differences are reviewed against actuals in the following month. A flash report cannot replace full financial statements either; it must state clearly which figures are estimates. Year-end closing and tax work must follow the standards and the deadlines set by law.
How to measure
- Number of days from month-end to report delivery
- Number and amount of adjustments after the close
- Number of tasks not completed on the calendar, by cause
- Unreconciled balances and the age of outstanding items
Common misunderstandings
Speed does not always come from buying a new system. If the process still waits for documents from site, a new ERP will only record that delay faster. Fix the task order, the source data and responsibilities first, then look at which tasks should be automated, such as pulling statements, matching invoices to POs, or posting recurring accruals every month.
Another problem is closing fast by pushing the hard tasks to next month, for example not reconciling intercompany balances, not checking inventory ageing, or leaving differences in a suspense account. The figures come out fast but become less reliable, and it often shows up as a large adjustment at year-end. So the speed measure must always be read together with post-close adjustments and the age of unreconciled balances.
The close is a task shared across the whole company. Sales must send handover data, the warehouse must close receipts and issues, the project team must submit work acceptance certificates, and management must review on time. If the accounting team is the only one chasing, the same delays will recur every month. A short fifteen-minute meeting after each close, to see which tasks got stuck and what to fix next cycle, will improve the calendar month by month, and the owner should ask about the results of the improvements, not only the profit figure.
Next steps
- Record the time taken for each task in the next close, separating actual working time from waiting time
- Draw the task sequence and find the critical path
- Announce the cut-off and the calendar so that people outside accounting are aware of them
- Move forward to before month-end the tasks that can be moved
- Agree the monthly close materiality threshold with management
- Set a target to cut the number of days step by step, while tracking post-close adjustments alongside