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Financial Close

Why the Financial Close Matters: Harnessing Best Practices for Startups

In the bustling world of startups, where innovation and speed often take the spotlight, one critical aspect that should never be overlooked is the financial close process. Known commonly as “Closing the Books,” this process, whether conducted monthly, quarterly, or annually, plays a pivotal role in the financial integrity of any company. It’s not just a matter of routine accounting; it’s about ensuring the lifeblood of the business – its financial statements – are accurate, reliable, and reflective of its true fiscal health.

The terms “Finance Close Process” or “Closing the Books” are broad descriptions of a process completed monthly, quarterly, or annually to ensure financial statements are completed and accurate. Ensuring the accuracy of financial statements is the primary goal of the Close, but any startup can take best practices from this process to improve internal efficiencies and reporting. This isn’t merely about compliance or meeting regulatory standards; it’s an opportunity to glean insights, streamline operations, and position the startup for sustainable growth and investor confidence.

Close Process Creation

Even if one is in place today, the first step in improving the Close process is documenting every financial account or metric the company needs to review. Once that list is completed, the company should identify which accounts need to be reviewed monthly, quarterly, or annually. For a smaller company, monthly revenue reconciliations should ensure every client is properly billed, while accounts like stock option expense can likely be done annually. But every account and metric should be listed so employees work from a standard document, not based on memory or prior activity.

Close Process Timeline

Once the company establishes the steps required, they should estimate the time to complete, key dependencies, when steps can start, and when they would like to officially “Close” the books to share data with stakeholders. Some processes, like payroll reconciliations or expense accruals, can occur before the month ends. Other processes, like revenue reconciliation and accounts receivables reconciliations, are highly dependent upon each other and should be done simultaneously. When first starting, a company should establish a date to publish its results and work backward to determine when to start. One final item to consider is employee workload to ensure a single employee doesn’t have multiple responsibilities due simultaneously.

Why Should Growth Companies Adopt

Creating a formalized Close process, even at a small company, decreases the time to complete repetitive tasks, ensures accurate reporting, and creates internal accountability. If the company only runs payroll once every month, a simple checklist of steps ensures payroll is accurate and complete without relying on what was done the previous month. A reconciliation of revenue to cash to MRR (if a SAAS business) ensures that revenue is accurate and, more importantly, every customer has been invoiced properly. Publishing a formal calendar, including internal assignments, creates team accountability and removes questions about responsibility and timing. The process creates consistency in reporting, in accuracy and timing, that investors appreciate, as they will not have to chase the company for information. And when it comes time to grow, the time-tested processes can be handed to junior employees to complete.

Don’t Forget to Include Metrics and Reporting

While the term Close normally refers to the accounting process, we always recommend including standard metrics as part of the process. If the company presents SAAS metrics like ARR, MRR, or bookings, the sales operations team should be included in the process to reconcile those metrics. In other blogs we have discussed budgeting and forecasting, and part of the Close process should include comparing actual results to the budget to understand the variance. The result of that analysis might require an update to the future forecast.

What is Reconciliation?

A reconciliation compares the data from a system of record (normally accounting or CRM software) to an independent statement. The most common reconciliation is a credit card recon, which compares all spending on the card (from the card provider) to the accounting system to ensure all activity is reflected in the P&L. But for SAAS companies, other key reconciliations include cash and MRR. For a cash recon, the company should compare all deposits by the customer to invoices processed and revenue. While a granular task, it will identify if the company missed collecting from any customers. An MRR recon should be able to take the beginning MRR, add in any new business or upsells, remove any downsells or churns, and tie to the ending MRR.


In the fast-paced startup environment, mastering the financial close process is crucial for accuracy and growth. This article highlights the importance of a structured “Closing the Books” approach, emphasizing efficiency and investor trust. For expert guidance in optimizing these processes, contact Bagchi Group to transform your startup’s financial management into a strategic asset.


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