Month-End Close in 5 Days: A Playbook for Professional Services Firms

If your January financials aren’t ready until mid-February, you’re making February decisions with November data.

That’s the reality for most professional services firms. The typical small consulting firm, marketing agency, accounting firm, or IT services company takes 15-20 business days to close their books. Missing time entries trickle in late. Bank accounts won’t reconcile. Revenue recognition gets murky. Expense reports lag. By the time financials are ready, they’re already outdated.

But it doesn’t have to be this way.

World-class professional services firms close their books in 5 days. Not because they have bigger teams or expensive enterprise software, but because they’ve eliminated the bottlenecks and standardized the process. They know exactly what happens each day, who owns each task, and when decisions get locked in.

This isn’t theoretical. Firms that achieve a 5-day close make better decisions, catch cash flow problems early, and adjust pricing and staffing faster than their slower-closing competitors. They have financial visibility while the month is still fresh in everyone’s mind.

This playbook shows you how to get there.

Why Close Speed Matters More Than You Think

Most firm owners view the month-end close as a compliance checkbox. Get it done, file it, move on. But speed of close is actually a competitive advantage—especially for professional services firms where margin management and resource allocation drive profitability.

Stale Data Kills Decision-Making

When your February financials come in March 15th, you’re already two weeks into the next month. Did you overhire last month? You won’t know for weeks. Is a major client project running at a loss? You’ll catch it too late to adjust scope or staffing. Did you miss your cash forecast? By the time you see it, client payments are already overdue.

The executive team needs to see last month’s results while there’s still time to course-correct. A project manager should know within days if their project is off budget. A managing partner needs to see partner billable hour trends before they tank for three months straight.

Research from firms specializing in close optimization shows that the top 10% of finance teams—those closing in 1-2 days—make better hiring decisions, catch bad debt problems earlier, and respond to revenue shortfalls with more precision than firms taking 15-20 days. The cost of delayed financial visibility compounds across the year.

Cash Flow Visibility Prevents Crisis

Professional services is a cash flow business. You pay employees on a fixed schedule. Clients pay on variable schedules (sometimes 30, 60, or 90 days out). A fast close tells you immediately if your cash position is tightening. If you don’t see this until day 20 of the month, you’re already scrambling.

A proper month-end close—one that includes an AR aging analysis and cash flow projection—gives you a 3-5 day buffer to take action. Do you need to accelerate collections? Push back a new hire? Reduce discretionary spending? You make these decisions while you still have options, not when you’re already in the red.

Speed Drives Better Pricing and Staffing

For fixed-price projects, margin visibility is critical. If you don’t know whether a project is profitable until three weeks later, you’ve already staffed the next phase wrong. A fast close lets you see project margin trends in real time, adjust pricing on the next proposal, and catch scope creep before it kills a project.

Similarly, if you’re seeing consistent understaffing on certain service lines, you need to know this in the first week of the month, not the third. A 5-day close gives you time to adjust hiring plans while the market is still fresh.

The Competitive Reality

Firms that close in 5 days have their finger on the pulse of the business. They’re not flying blind. They know their cash position, their project profitability, and their resource utilization. This information advantage compounds. Over a year, a firm closing in 5 days makes 12+ decisions about staffing, pricing, and cash management that a slower firm never gets to make.

The 10 Bottlenecks That Slow Down Your Close

Before you can fix something, you need to see it. Here are the specific bottlenecks that typically add days to the close process. Most firms have 6-8 of these.

1. Missing or Late Time Entries

The single biggest hold-up. If your team doesn’t clock in time until day 5 of the month, your revenue can’t be recognized, and you can’t close. This bottleneck alone adds 2-3 days to the close, since finance has to chase down the managing partner, who has to chase down project managers, who have to get in touch with team members.

Solution: Lock time entries at COB on the last day of the month. No exceptions. Build this into your culture and enforce it consistently.

2. Unreconciled Bank Accounts

Outstanding checks and deposits in transit are normal. But if you don’t have a documented reconciliation process, they pile up. One $15,000 deposit that shows on the bank statement but hasn’t hit your books yet throws off your entire closing process until you find it.

Solution: Reconcile daily or weekly, not monthly. Use automated bank feeds in QuickBooks Online. Identify exceptions as they happen, not in a batch.

3. Unclear Revenue Recognition Policy

Does a fixed-price project get recognized as revenue when the contract is signed? When work starts? When work is completed? When the invoice is sent? When payment is received? If you have no standard policy, every project becomes a judgment call, and someone is going to argue about it on day 15 of the close.

Solution: Document your revenue recognition policy by billing type and stick to it consistently.

4. Delayed Expense Reports

Employees submit expense reports whenever they feel like it (or never). Finance can’t close without them because they’re uncertain about monthly expenses. If 20% of last month’s expenses come in on day 18, you can’t finalize accruals.

Solution: Set an expense report deadline at the end of each month. Make it non-negotiable.

5. Intercompany Transactions

If you have multiple legal entities, intercompany payables and receivables need to be documented and matched. If the left hand doesn’t know what the right hand is paying, you’ll spend half a day finding $8,000 in transactions that need to be reclassed.

Solution: Create a pre-close checklist of known intercompany transactions and reconcile them before the close starts.

6. AR Confusion

Which invoices have been paid? Which are disputed? Which should be written off as uncollectible? If you’re not running an AR aging report and reviewing it against your actual client communications, you’ll spend hours trying to figure out what’s real.

Solution: Run an AR aging report on day 28 of the month. Review it with the project manager or account manager. Flag anything that needs follow-up.

7. Prepaid Amortization Not Recorded

You’ve got insurance, software subscriptions, annual maintenance fees. These need to be amortized monthly. If you’re hand-journaling these every month instead of setting up recurring entries, you’ll miss some, and you’ll spend time hunting down what you missed.

Solution: Create recurring journal entries in QuickBooks Online for all prepaid items at the start of the year.

8. Accrual Estimates Not Prepared

You need to accrue for bonuses, payroll taxes, vacation liability, and other obligations. If these aren’t estimated and documented before the close, someone is going to guess, and you’ll have to back out bad accruals later.

Solution: Prepare accrual estimates on day 3 of the close. Use historical data to estimate (e.g., payroll taxes as a percentage of payroll, vacation liability based on outstanding days).

9. Payroll Timing Issues

If you run payroll on the 25th of the month and it posts on the 1st of the next month, you need to book an accrual on the last day of the month. If you run it on the 1st (before the close is done), you need to make sure the journal entry posts in the right month. Either way, this is a source of confusion.

Solution: Standardize your payroll timing. Run it the same day every month and know exactly when it posts.

10. Manual Journal Entries

The more manual JEs you’re creating, the more chance for error. And if you’re sourcing JEs from five different spreadsheets instead of a centralized list, you’ll miss something. You’ll close the books, and three days later, someone says, “Did we accrue for the conference sponsorship?”

Solution: Create a pre-close journal entry checklist. Know exactly which JEs need to be recorded and in what order.

The 5-Day Close Playbook: Day by Day

Here’s the exact sequence we recommend. This assumes your month ends on the 28th or 30th. Adjust the schedule based on when your fiscal month ends.

Day 1: Revenue Recognition and Time Entry Cutoff

Morning (8am-12pm): Lock time entries. Every hour of billable work for last month must be logged by 11:59pm yesterday. This is non-negotiable. No time entries accepted after cutoff.

Action: Email your team at 9am on the last day of the month: “Time entries lock tonight at 11:59pm. No late submissions.” Send a reminder at 4pm. This single action eliminates days of chasing.

Midday (12pm-3pm): Pull time entry reports by project from your integrated CRM/project management system. Verify billable hours, confirm billing rates, and check that the billable_amount field (hours × rate) is calculating correctly for each project.

Action: Download a CSV export of all time entries. Cross-reference against your billing types: Fixed Price, Hourly, Retainer. For each type, verify that revenue is being recognized according to your policy.

  • Fixed Price: Has work been completed or is this percent-of-completion? If percent-of-completion, calculate the revenue based on actual hours incurred divided by total budgeted hours. If completed contract, only recognize revenue when the project is 100% done.
  • Hourly: Recognize revenue equal to billable hours × rate as long as the hours are logged.
  • Retainer: Recognize the full monthly retainer amount if the month is complete (services have been delivered through month-end).

Late afternoon (3pm-5pm): Reconcile billed revenue to project budget. Pull your project budget report. Verify that billable hours and rates tie to your billing structure. If a project’s billed amount doesn’t match your budget, investigate: Is the scope undefined? Are rates misaligned? Is the project off track?

Action: Create a “Revenue Reconciliation” worksheet. List each active project, budgeted revenue, actual revenue recognized, and variance. Highlight any project with variance > 10%.

End of Day 1 Status: All time entries locked. Revenue recognized by project. Budget variance report completed.

Day 2: Bank Reconciliation and AP Review

Morning (8am-11am): Bank reconciliation. Pull your bank statements from all accounts. Log into QuickBooks Online. Review cleared transactions.

Action: If you’re using automated bank feeds in QBO, most transactions should already be matched. Your job: find and investigate unmatched items. Look for:

  • Outstanding checks (checks you wrote that haven’t cleared yet)
  • Deposits in transit (money you’ve recorded but the bank hasn’t posted yet)
  • Bank fees or interest that need to be journaled
  • Any transaction that shows on the bank statement but not in your books

For each unmatched item, determine: Is this a timing difference (will resolve next month)? Or is this a real error (transaction recorded wrong, amount mismatched)? Document your findings.

Midday (11am-1pm): Create a bank reconciliation summary. In QBO, mark all reconciled items as cleared. Reconciliation is complete when your GL cash balance matches your bank statement balance (accounting for outstanding items).

Action: Print the reconciliation report from QBO. Review for any exceptions. If balances don’t match, dig into the exceptions until you find the discrepancy.

Afternoon (1pm-5pm): AP review. Pull a list of all unpaid vendor invoices. Identify:

  • Invoices that should have been paid (did we miss a payment?)
  • Invoices received for last month’s expenses (should be accrued)
  • Invoices received this month for next month’s services (prepaid)

Action: Create an “AP Aging” report. For each open vendor invoice, note the invoice date, due date, and whether payment was made. For invoices related to last month but not yet paid, create an accrual.

End of Day 2 Status: Bank accounts reconciled. AP aging documented. Accruals identified.

Day 3: Payroll, Benefits, and Accruals

Morning (8am-10am): Payroll posting. Confirm that last month’s payroll has been properly journaled. If you use an integrated payroll system that auto-posts to QuickBooks, verify the posting is accurate. If you manually journal payroll, record the entry now.

Action: Pull your payroll report from your payroll provider. Verify:

  • Gross payroll amount
  • Tax withholdings (federal, state, FICA)
  • Any deductions or benefits

Create a journal entry:

Debit: Payroll Expense [amount]
Credit: Payroll Liability [amount]
Credit: Cash [amount]

If payroll posted in the wrong month, reverse the entry and re-post in the correct period.

Midday (10am-1pm): Benefits and payroll taxes accrual. Accrue for:

  • Employer payroll taxes (social security, Medicare, unemployment) not yet paid
  • Health insurance (employer portion) not yet paid
  • Retirement contributions not yet made
  • Vacation/PTO liability (if accrued, based on outstanding days)

Action: Use historical percentages to estimate. For example:

  • Payroll taxes: typically 10-12% of gross payroll
  • Health insurance: use your monthly premium
  • Retirement contributions: use your stated percentage of salary
  • Vacation: count outstanding days × average hourly rate

Record journal entries for each:

Debit: Payroll Tax Expense
Credit: Payroll Tax Liability

Debit: Benefits Expense
Credit: Benefits Liability

Afternoon (1pm-5pm): Other accruals. Identify expenses incurred in the last month that haven’t been paid or invoiced yet:

  • Professional services (accounting, legal, consulting) billed after month-end
  • Contractor invoices expected
  • Depreciation and amortization (if not set up as recurring)
  • Interest expense
  • Warranty or service obligations

Action: For each accrual, estimate the amount and create a journal entry. Document your estimate method (e.g., “Estimated professional services at 30% of budget based on hours tracked”).

End of Day 3 Status: Payroll journaled. Accruals recorded. Expense estimates documented.

Day 4: AR Review and Bad Debt Assessment

Morning (8am-12pm): AR aging report. Pull your AR aging from your CRM or project management system.

Action: Export the AR aging to a spreadsheet. Organize by bucket:

  • Current (0-30 days)
  • 1-30 days past due
  • 31-60 days past due
  • 61-90 days past due
  • 90+ days past due

For each invoice past due, note the client, invoice amount, invoice date, and expected collection date.

Midday (12pm-3pm): Validation and collection review. Walk through the AR aging with your project manager or account manager.

Action: Ask for each past-due invoice:

  • Has payment been promised? If yes, when?
  • Is the invoice disputed? If yes, what’s the dispute and when will it be resolved?
  • Should we be pursuing this? Is the client in financial trouble?

Late afternoon (3pm-5pm): Bad debt assessment. Based on your review, determine if any invoices should be written off or reserved for bad debt.

Action: For invoices > 90 days, assess collectibility. If the client has gone silent or is in financial distress, consider a bad debt reserve. Create a journal entry:

Debit: Bad Debt Expense
Credit: Allowance for Doubtful Accounts

This reduces your accounts receivable and recognizes the bad debt risk.

End of Day 4 Status: AR aging reviewed. Collectibility assessed. Bad debt accruals recorded.

Day 5: Final Review, Adjustments, and Financial Statement Generation

Morning (8am-10am): Comprehensive review. Pull a trial balance from QuickBooks Online. Review every account. Are there any entries that look wrong? Any balances that don’t make sense?

Action: Line-by-line review of the trial balance:

  • Does cash balance match your reconciled bank balance?
  • Do accounts receivable match your AR aging?
  • Do prepaid expenses match your amortization schedule?
  • Do accrued expenses match your documented accruals?
  • Does revenue match your time entry reconciliation?

Flag any discrepancies.

Midday (10am-2pm): Adjusting entries. Based on your review, create any additional journal entries needed to correct errors or make final adjustments.

Action: Common adjustments:

  • Reclassification of project expenses to cost of revenue
  • Correction of prior-month entries that were recorded in the wrong account
  • Adjustments to prepaid amounts based on actual usage
  • Reversal of accruals that are no longer needed

Document each entry with a clear description.

Afternoon (2pm-5pm): Financial statement generation and final review. Generate your balance sheet, income statement, and cash flow statement from QuickBooks Online.

Action: Final checks:

  • Balance sheet: Does it balance? Are all asset and liability accounts reasonable?
  • Income statement: Does revenue tie to your time entry reconciliation? Do expenses make sense relative to payroll and other known costs?
  • Cash flow: Is your operating cash flow positive? Any big swings from prior month?

Share the draft financials with your managing partner or owner. Get feedback. Are there any items that don’t look right?

End of Day 5 Status: Trial balance reviewed. Adjusting entries recorded. Final financial statements generated and reviewed.

Revenue Recognition for Each Billing Model

Professional services firms typically use three billing models. Each has different revenue recognition timing.

Fixed Price Projects

In a fixed-price engagement, you’ve quoted the client a flat fee for a defined scope of work.

Revenue Recognition Approach: You have two options. Most smaller firms use the completed contract method: recognize the full revenue only when the project is 100% complete and delivered to the client. Some use percentage of completion: recognize revenue as a percentage of the project’s total hours completed relative to total estimated hours.

Example - Completed Contract Method:

  • January: $50,000 fixed-price project starts. No revenue recognized yet (work in progress).
  • February: Project is 80% complete. Still no revenue recognized.
  • March: Project is 100% complete and delivered. Recognize full $50,000 revenue.

Example - Percentage of Completion Method:

  • You budgeted 500 hours at $100/hour = $50,000 project
  • January: 100 hours logged (20% complete). Recognize $10,000 revenue.
  • February: 250 hours logged (50% complete). Recognize $25,000 revenue.
  • March: 150 hours logged (30% complete). Recognize $15,000 revenue.

During the Close: Pull your fixed-price project list. For each active project, determine: Is this completed? If using percentage of completion, calculate completion percentage based on hours logged divided by budgeted hours. Your PM system or CRM should have a billable_amount field that tracks the budgeted amount and actual hours. Verify this calculation is correct.

Hourly Projects

In an hourly engagement, you bill the client for actual hours worked at an agreed-upon hourly rate.

Revenue Recognition: Recognize revenue equal to billable hours times the hourly rate, as long as the hours are billable and the engagement is active.

Example:

  • January: 40 billable hours at $150/hour = $6,000 revenue
  • February: 35 billable hours at $150/hour = $5,250 revenue

During the Close: Pull your hourly project list. For each project, sum all billable hours for the month and multiply by the agreed hourly rate. This is your revenue for that project. Your PM system should automatically calculate this if it has proper time tracking and billing rate configuration.

Retainer Engagements

In a retainer, you’ve quoted the client a fixed monthly amount for a specified level of service (e.g., 10 hours per week of consulting, or ongoing support).

Revenue Recognition: Recognize the full monthly retainer amount at the end of the month if you’ve provided the services through month-end. If the client canceled mid-month, recognize revenue proportionally (e.g., if they canceled after 2 weeks, recognize 50% of the retainer).

Example:

  • Retainer: $4,000/month for ongoing advisory services
  • January: Full $4,000 recognized (services delivered all month)
  • February: $2,000 recognized (client canceled mid-month after services were delivered through Feb 15)

During the Close: Pull your retainer list. For each retainer, confirm it was active through month-end. Recognize the full monthly amount. If any retainer was canceled or paused mid-month, calculate the pro-rata revenue.

Integration with Your Systems: Modern PM systems tie time entries to projects, flag billable hours, and calculate revenue automatically. Your integrated CRM and PM system should have:

  • Time entries by project with billable flag
  • Project billing type (Fixed, Hourly, Retainer)
  • Hourly rate or fixed fee amount
  • billable_amount field that auto-calculates
  • Budget tracking for comparison

During the close, pull a CSV export of your time entries and projects. Reconcile the exported billable amounts to what you’ve recognized as revenue. Any discrepancy should be investigated.

Automating the Close: What Can Be Hands-Off

The more you automate, the faster you close. Here’s what can run without manual intervention.

Bank Feed Reconciliation in QuickBooks Online

If you’ve set up automated bank feeds in QBO, transactions download directly from your bank and match to your recorded entries. This eliminates the manual task of downloading your bank statement and hand-matching every transaction.

Setup: Connect your bank account to QBO. QBO will download transactions daily. Configure matching rules (e.g., transactions within $0.01 are an automatic match). Review unmatched items weekly.

Benefit: By month-end, 90%+ of your transactions should already be matched. Reconciliation is a matter of confirming matched items and investigating the remaining 10%.

Automated AR Aging Reports

Your CRM or PM system can generate AR aging reports automatically. These show which invoices are outstanding and how many days past due they are.

Setup: Configure your system to generate AR aging on day 28 of the month automatically. Email it to your account manager. They review for collectibility issues and flag any concerns.

Benefit: AR review happens without you asking for it. You walk in on day 4 of the close with a pre-generated report ready for review.

Time Entry Deadline Reminders

Your PM system can send automated reminders to team members on the last day of the month: “Time entries lock in 4 hours. Make sure all work is logged.”

Setup: Schedule automated emails from your PM system on day 28 at 8am and 4pm reminding everyone about the cutoff.

Benefit: This dramatically increases compliance. Late time entries drop from 20% to 5%.

Recurring Journal Entries for Depreciation and Amortization

Instead of manually journaling depreciation and amortization every month, set up recurring entries in QBO.

Setup: In QBO, go to Settings > Recurring Transactions. Create a recurring entry for depreciation (if applicable) and amortization of intangible assets or prepaid items.

Example:

Recurring: Depreciation Expense
Debit: Depreciation Expense $2,000
Credit: Accumulated Depreciation $2,000
Frequency: Monthly, runs on day 1 of each month

Benefit: This entry posts automatically. You don’t have to remember it or calculate it manually.

Automated Payroll Journal Posting

If you use an integrated payroll system that connects to QBO (like Gusto, BambooHR, or ADP), payroll posts automatically. When you run payroll, the system creates the appropriate journal entries in your GL.

Setup: Connect your payroll system to QBO via API. Confirm settings so payroll posts in the correct period.

Benefit: You don’t have to hand-journal payroll. It’s one less task on your close checklist.

Dashboard Reporting for Close Status

A modern Metabase-style dashboard can show you real-time close status: How many accounts have been reconciled? How much of AR has been reviewed? What’s the status on accruals?

Setup: Create a close status dashboard with key metrics:

  • % of time entries received
  • % of accounts reconciled

  • of AR invoices > 90 days overdue

  • of accruals recorded

  • GL trial balance status

Benefit: You and your team can see exactly where you are in the close at any point. Bottlenecks become visible immediately.

The Close Checklist

Use this checklist during your 5-day close. Assign each task to a specific person. Mark items complete as they’re finished.

Day 1: Revenue Recognition and Time Entry Cutoff

  • Send time entry deadline reminder (8am)
  • Send second time entry reminder (4pm)
  • Lock time entries at 11:59pm
  • Pull time entry report by project from PM system
  • Verify billable hours for each project
  • Verify billing rates match contract
  • Confirm billable_amount field is calculating correctly
  • Reconcile billed revenue to project budget
  • Create “Revenue Reconciliation” worksheet
  • Highlight projects with variance > 10%
  • Document any revenue recognition questions or exceptions

Day 2: Bank Reconciliation and AP Review

  • Pull bank statements for all accounts
  • Review matched transactions in QBO
  • Investigate all unmatched items (outstanding checks, deposits in transit, fees)
  • Document exceptions and timing differences
  • Reconcile GL cash balance to bank statement
  • Complete bank reconciliation in QBO
  • Print and review reconciliation report
  • Pull list of unpaid vendor invoices
  • Identify invoices received for last month’s expenses
  • Create accrual entries for unpaid last-month invoices
  • Distinguish between accruals and prepaid items
  • Create “AP Aging” report

Day 3: Payroll, Benefits, and Accruals

  • Confirm last month’s payroll posting is accurate
  • Verify payroll amount, taxes, and deductions
  • Create payroll journal entry if not auto-posted
  • Estimate employer payroll taxes (10-12% rule)
  • Create payroll tax accrual entry
  • Estimate health insurance expense and accrual
  • Create health insurance accrual entry
  • Estimate retirement contributions and accrual
  • Create retirement accrual entry
  • Calculate vacation/PTO liability (if applicable)
  • Create vacation accrual entry
  • Identify other accruals (professional services, contractors, depreciation, interest)
  • Estimate amounts using historical data
  • Create accrual journal entries with documented methods
  • Review all accrual entries for reasonableness

Day 4: AR Review and Bad Debt Assessment

  • Export AR aging from CRM/PM system
  • Organize by aging bucket (0-30, 31-60, 61-90, 90+)
  • Review past-due invoices with account manager
  • For each past-due invoice, note promised payment date or dispute status
  • Assess collectibility of invoices > 90 days
  • Identify invoices that should be written off
  • Estimate bad debt reserve if needed
  • Create bad debt journal entry
  • Document any expected collections or adjustments

Day 5: Final Review, Adjustments, and Financial Statement Generation

  • Pull trial balance from QBO
  • Line-by-line review of all accounts
  • Verify cash balance matches bank reconciliation
  • Verify AR matches AR aging report
  • Verify prepaid items match amortization schedule
  • Verify accrued expenses match documented accruals
  • Verify revenue matches time entry reconciliation
  • Flag any discrepancies
  • Create journal entries for any necessary corrections
  • Reverse any incorrect prior-period entries
  • Generate balance sheet from QBO
  • Generate income statement from QBO
  • Generate cash flow statement from QBO
  • Final balance sheet reasonableness check
  • Final income statement reasonableness check
  • Final cash flow reasonableness check
  • Share draft financials with managing partner
  • Address partner feedback or questions
  • Approve and finalize financial statements

Measuring Close Performance

To drive continuous improvement, measure your close process. Track these metrics month over month.

Close Cycle Time

How many days from month-end to final approved financials? Measure this every month. Your goal: 5 days.

Track:

  • Day 1 completion: Time entries locked, revenue reconciled
  • Day 2 completion: Bank and AP reconciled
  • Day 3 completion: Payroll and accruals recorded
  • Day 4 completion: AR reviewed and bad debt assessed
  • Day 5 completion: Financial statements approved

If Day 2 is consistently slipping to day 3, your bank reconciliation process has a bottleneck. If Day 4 is slipping, your AR review is too detailed or your data is messy. Use these delays to identify where to focus improvement effort.

Number of Adjusting Entries

How many journal entries did you have to create? Fewer is better. If you’re creating more than 8-10 adjusting entries per month, your systems are too manual.

Track:

  • Payroll entries (should be 1-2)
  • Accrual entries (should be 4-6)
  • Correction entries (should be 0-2)
  • Total (goal: 6-8)

If you’re consistently above 10, focus on automation: set up recurring entries, improve time tracking data quality, or tighten your AP process.

Error Rate

How many errors did you catch during the close? How many did you catch after?

Track:

  • Errors found during close (good)
  • Errors found after close is approved (bad)

Errors found after cost you credibility. They also require reversals, which add to next month’s close complexity. Invest in catching errors earlier.

Variance Analysis

How much did your preliminary numbers change after adjusting entries? This tells you how tight your month-end controls are.

Track:

  • Preliminary revenue (based on time entries)
  • Final revenue (after adjustments)
  • Preliminary net income
  • Final net income
  • Variance %

If your revenue variance is > 5%, your revenue recognition process isn’t clear or your team doesn’t understand it. If your net income variance is > 3%, your accrual estimates are off.

AR Days Outstanding

How many days of revenue are sitting in AR? This tells you about your collections process.

Track:

  • Month-end AR balance
  • Month-end revenue
  • Days outstanding = (AR balance / month revenue) × 30

Industry benchmark for professional services: 30-45 days. If you’re above 45, your collections process needs attention. If you’re below 25, you’re collecting quickly (good).

Use these metrics in a monthly review. Every month, pull the metrics and compare to prior month and year-to-date. Are we getting faster? More accurate? What’s trending wrong? Use the insights to adjust your process.

Key Takeaways

  • Speed of close is a competitive advantage. Firms closing in 5 days make better decisions, catch problems earlier, and adjust pricing and staffing faster than slower competitors.

  • The bottlenecks are predictable. Missing time entries, unreconciled bank accounts, unclear revenue recognition, and delayed accruals account for most of the delays. Eliminate these, and you’re down to 5 days.

  • The 5-day process is a sequence, not a list. Follow the day-by-day flow: Day 1 (revenue and time entries), Day 2 (bank and AP), Day 3 (payroll and accruals), Day 4 (AR and bad debt), Day 5 (final review and statements). Each day builds on the previous.

  • Automation reduces manual work. Bank feeds, recurring entries, automated AR reports, and time entry reminders remove hours from your close. Invest in these first.

  • Measurement drives improvement. Track close cycle time, error rates, adjusting entries, and variance. Use these metrics to spot bottlenecks and prioritize improvements.

  • The checklist is your roadmap. Use the 23-item close checklist for every month. Assign tasks, track completion, and iterate. After three months, you’ll know where your bottlenecks are and how to fix them.

Frequently Asked Questions

Q: What if we can’t get all time entries by the last day of the month?

A: Set a hard cutoff. No exceptions. This is the single most important discipline in the close. If your team knows entries close at 11:59pm on the last day, they’ll get them in. If they know they can submit late, they will. Enforce it consistently for three months and your compliance rate will jump from 70% to 95%.

Q: How do we handle revenue recognition if we use mixed billing models in the same engagement?

A: Document which portions are fixed, hourly, and retainer. Allocate hours and revenue to each bucket. For example: “First 20 hours per month are retainer. Overage hours are billed hourly.” During the close, reconcile each portion separately using its own revenue recognition rule.

Q: What if a client disputes an invoice mid-close?

A: Don’t reverse the revenue. Note the dispute and create a reserve on Day 4 during AR review. If the dispute is later resolved, reverse the reserve. If the invoice ends up being bad debt, write it off. This approach prevents revenue from bouncing in and out of your financials.

Q: Should we accrue for bonuses even if they’re not paid monthly?

A: If bonuses are earned monthly but paid quarterly, accrue monthly. This matches revenue to the effort that generated it. If bonuses are paid at year-end based on annual performance, accrue monthly based on your expected payout divided by 12. Adjust the accrual if performance changes.

Q: What if we miss something during the 5-day close?

A: It will surface when you track your metrics or when your accountant reviews the financials. When it does, ask: Why did we miss this? Is it a process problem (we didn’t check) or a data problem (the data was wrong)? Add the missing item to your Day 1-5 checklist so you don’t miss it next month.

Q: Can a 2-person accounting team really close in 5 days?

A: Yes. In fact, small teams often close faster because there’s less coordination required. The key is automation (bank feeds, recurring entries) and discipline (time entry deadlines, standard processes). A 2-person team closing in 5 days will beat a 5-person team taking 15 days because they’re using their time more efficiently.

Next Steps: Build Your 5-Day Close

The path from 15-day close to 5-day close isn’t quick, but it’s straightforward:

  1. Identify your bottlenecks. Track close time for three months. Where are you losing days? Time entry delays? Bank reconciliation? AR review? Focus on the worst offender first.

  2. Build your process. Use the 5-day framework above. Adapt it to your firm’s specific needs. Document each day’s tasks and assign owners.

  3. Automate where possible. Set up bank feeds in QuickBooks Online. Create recurring journal entries for depreciation and amortization. Configure automated AR aging reports. Automated time entry reminders. These save 6-8 hours of manual work per month.

  4. Standardize your close checklist. Use the 23-item checklist provided above. Run it every month. Track completion. Over time, you’ll streamline it further based on what works for your firm.

  5. Measure and adjust. Track close cycle time, error rate, and adjusting entries. Monthly review of these metrics will surface where to focus improvement effort.

  6. Build the discipline. The hardest part isn’t the process—it’s the discipline. Time entry deadlines. Expense report deadlines. Bank reconciliation weekly, not monthly. This requires leadership enforcement. Make the close a priority, and your team will follow.

Start with Day 1: Lock time entries. Make it non-negotiable. That single change will cut your close time by 2-3 days immediately. Once that’s working, move to Day 2. Build it piece by piece.

In three months, you’ll have a 5-day close. In six months, you’ll be wondering why you ever took 15 days.

Sources

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