How long does a month end accounting close typically take?

This is a great question and also my biggest pet peeve with other CPA's. Before I go off on a rant let's talk about some of the variables involved with closing the books.

First - who are you closing the books for? Are the financial statements for internal us only or are you reporting to third party stakeholders? Is the business a publically traded company or a small private closely held company? Some CPA's might say the answers to these questions shouldn't matter that you should close each month within in a few days a week at the outside. Maybe in theory and fantasyland that is true but in the real world it makes a difference.

Second - How up-to-date are your reporting systems? Are all your reporting systems integrated in one software application? Is all the information required to produce accurate financial statements available days after the month ends? Accounting departments are notoriously understaffed leading to always being behind in record keeping. Many small businesses use a variety of reporting systems - as an example payroll is often outsourced to Paychex or other payroll providers. What does all this mean? It means that for many businesses it is virtually impossible to close the books and produce accurate financial statements within a week of month end.

Third - Are the financial statements prepared on an accrual basis or cash basis? If they are for internal use only and on the cash basis then you can expect to close within a week of the previous month. However, most businesses report on the accrual basis and quite simply don't have enough information available to produce accurate reports. Many CPA's will say well just make estimates for expenses based on recent history and trends. My response is "Are we writing a novel or a documentary?" While estimates have their place, if your accounting systems are just a collection of estimates and the following month you make correcting entries for the previous months estimates - are your financial statements reflecting reality?

Fourth - What is the hurry to close the month? Isn't your business tracking other real-time metrics to help guide your decision making process? Wouldn't it be better to target a realistic time frame when you can produce accurate financial statements based on real data? I always tell clients a realistic time frame for preparing monthly financial statements is between the 15th and 20th of the following month.