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Timely Close of the Financial Records

Timely close of the financial records – this is a topic every company needs to address. Whether you are a publicly traded or private company, the issue of closing the books is ongoing. Publicly traded companies usually have well established processes in place to meet the deadlines imposed on by the regulators. However, closely held businesses often struggle with this process. We see many clients that tell us it takes them weeks, if not months, to close the books and produce financial statements. This blog will discuss why it is important to close you accounting records as soon as possible. In addition, we will provide some tips on improving your financial close.

Timely Close of the Financial RecordsImportance of the Timely Close of the Financial Records

Why is it so important to close your books timely and generate financial statements? The executive team of the company must run the business, and there is no other way to run your business than to have timely and reliable financial statements.

I have met business owners that own a company with over $100 mm in revenue and no financial statements. They literally used a check book and online banking to check cash balances, pay down outstanding balances, etc. When I asked the business owner how he knows what his margins are and how he can run his business, his response was he has a“gut feeling”. I get that, and in a sector with high margins and strong cash flow, I can see where an owner gets confident about the amount of cash he pulls from the business monthly and stuffing his pockets. But that “gut feeling” will not help you when the market or economy turns. And it will one day.

A gut feeling cannot be measured or tracked. Fortunately, you can track your key performance indicators (KPIs.) Click here to discover your KPIs.

In a well run company, the decision makers must know how the business is performing by looking at the historical data. Historical data includes last month’s financials and even the trailing 12 months. With that information, the decision maker will apply his management skills and look at forecasts, then make executive decisions of what to do. The sooner the decision maker has the financial data, the quicker he can make a decision.

How to Close Your Books Sooner

How can you close your books sooner and produce financial reports? A delay in closing the accounting records and producing financial statements is very common. And sometimes, there are various causes for this.  It may be any one or several of the following:

How quick can you close the books? What is the right number of days to close the books? Well, it depends on many things. Certainly more than 10 days after the last day of the month is too long for me.


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I have always said that a well run company with the correct process and systems in place should be able to close the books any day of the month. Now with that said, the closer to the end of the month the more accurate the numbers will be because you limit the use of accruals to only a day or two. I would not suggest that it is okay to close your books too early. But your business should be able to start the close process a day or two before the last day of the month and have financial statements by the 5th day of the following month.

If your financial records are delayed by days or even months, then it will be more difficult to make any decision. Start tracking your KPIs as you close your books more timely with our KPI Discovery Cheatsheet.

Tips to Close Your Books Timely

Every company should be working toward timely close of the financial records. The following includes some tips to close your books timely:

    • Establish an accounting calendar close that includes deadlines for turning in information from operations and accounting, firm deadlines for certain activities
    • Hold people accountable in operations and accounting to meet the deadlines
  • Use accruals for revenue and expenses, no need to wait on actual invoices
  • Reliable accounting system
  • Hire the right people
  • Written process and procedures in the accounting department
  • Always include at least one day after the preparation of the financial statements for analysis

There is simply no excuse to delay the accounting close and generation of financial statements. Having the financial reports completed timely and analyzed before they are turned into the decision makers of the business will make your company a much better company.

When you close your financial records or books in a timely manner, you are able to make better decisions. In addition, monitoring your key performance indicators will help you to make better decisions. Need help discovering the KPIs you should be monitoring? Access our KPI Discovery Cheatsheet and start tracking your KPIs today!

Timely Close of the Financial Records

Timely Close of the Financial Records

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Are you maintaining accurate records?

maintaining accurate records

Have you ever sat down at your desk and seen papers everywhere, little to zero organization, and not been able to tell where your company stood financially right away? It is easy for financial leaders, executives, and other business leaders to get in this messy state. Sure, you may have once had accurate records and known exactly where you were. But maintaining accurate records consistently is a critical piece to positioning your company for sale, getting ready for growth, acquiring capital, etc.

Are you in the process of selling your company? The first thing to do is to identify “destroyers” that can impact your company’s value. Click here to download your free “Top 10 Destroyers of Value“.

First, what is accurate or accuracy? Oxford Dictionaries defines accuracy as “the quality or state of being correct or precise.” If your company’s records are not consistently correct and precise, you may encounter some undesired results.

Are you maintaining accurate records?

A simple way to answer this question is to look at your records. Can you easily pull client reports, tax filings for the past couple of years, or receipts from a specific vendor?  Are you able to find information quickly? How well are you able to manage your business with your current records?

Why Maintain Records

Maintaining accurate records is not just for external entities like the IRS, banks, venture capitalists, etc.; but it is also essential for major management decisions, customer support, and financial growth. It allows every party related to your business to see clearly where the company stands. Banks, attorneys, decision makers, etc. all need to understand how your company is positioned. “These records will help you analyze your business’s profitability, stay out of trouble with tax authorities, maintain positive relationships with clients and vendors, protect your business from lawsuits and win lawsuits if you are harmed” (Investopedia).

maintaining accurate records

No one likes to drive blind, so why would you have disorganized, inaccurate records that blind you from seeing the whole picture when making decisions?

How to Maintain Records

There are several ways to maintain accurate records. These include identifying revenue streams, keeping track of invoices and receipts, preparing financial statements, tracking deductible expenses and preparing tax returns. Although these are not all the important records you should maintain, they are a good starting point.

Identify Revenue Streams

This might seem like the most obvious thing to do. But oftentimes we arrive at a new client to find they are mixing business and nonbusiness receipts as well as taxable/nontaxable sources of income. Separate for-profit and non-profit clients from each other. If you service multiple industries, it might be useful to separate your revenue streams by industry.

You don’t want to avoid looking at your business’s revenue. Where did that revenue come from? Is there an industry or type of business that is more profitable than others? Maintaining accurate records isn’t just for those outside the business, but it also will allow you to understand your entire company’s performance.

If you’re selling your company, buyers want to see each revenue stream clearly. By not having accurate records, you may be looking at destroyers of value. To improve the value of your company, identify and find solutions to those “destroyers” of value. Click here to download your free “Top 10 Destroyers of Value“.

Prepare Financial Statements

To prepare precise financial statements, it is critical that you maintain accurate records. Your income statement and balance sheet act as a window into how your business is performing. If the data isn’t 100% accurate, then any decisions made based on that data will not be the best decisions possible. This is because the information isn’t reliable. This can cause a disaster!

Keep Track of Invoices & Receipts

Because of the importance of tracking profitability, you as the financial leader should have a process to track your income and expenses. As a major tool in managing cash, regularly produce reports of the amount and composition of accounts receivables and accounts payable, what has been collected and paid. Not only will this create a system to time payments and encourage your team to collect, but your bank or creditor will be able to rely on your system. This is essential knowledge for the banks to know if you are in a financial crunch.

Prepare Tax Returns

Taxes are a necessary part of operating a business. When you produce tax returns, precise records are required. You need to report income, expenses, and debt on this document. Thankfully, this is not a major burden on your time as you should already have these three categories accurately measured and tracked as you need them to effectively measure the success of your business.

Track Deductible Expenses

Unless you track your deductible expenses throughout the year, you will most likely forget them when you prepare your tax returns. Be sure to create a file for all deductible expenses.

Tips in Maintaining Accurate Records

There are a couple tips and tricks to maintaining accurate records. Some of these include separating personal and business finances, having client files, storing contracts, and maintaining accounting/tax records.

Separate Personal & Business Finances

One of the top rules in operating your own company is to separate personal and business financials. When companies do not separate business and personal finances, records are muddled and there is no clear method to see what is personal and what is business. By doing this, you may run into tax issues, relationship issues, and inaccurate records.

Have Client Files

Separate each client into their own individual file. This will allow you to easily see when they started doing business with you, what work you’ve done with them, and how your relationship is progressing. In addition, you will be able to save time by picking up just one file for the client. And you will have everything you need to know about them in that folder. Need to have invoices, etc. in another folder? Make copies and put everything related to that specific client in their folder.

Store Contracts

When you get served with a lawsuit, it can be shocking. But the best way to combat the stress is to know exactly where to find everything you need to battle your accuser. Store and make copies of all contracts in one place. Then categorize the contacts by clients, employees, vendors, suppliers, etc.. Organize the contracts in a way that makes sense for your business.

Maintain Accounting & Tax Records

The worst offence in maintaining accurate records is not staying on top of your accounting and tax records. Instead of doing the past three months of accounting in a week, create a system to update, maintain, and produce reports regularly. Submit these report for your financial and executive team to view on a schedule.

One of the main “destroyers of value” is not consistently having accurate records. If you are looking to sell your company or just want to improve its value, download your free guide to avoiding things that take value away from you.

maintaining accurate records

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