Pre-close preparation checklist for finance teams: reconciliations, accruals, predictable month-end closes

The Three Core Functions of the Month End Close Process

A robust pre-close process can be broken down into three logical functions. This framework organizes your financial close, ensuring that all closing procedures are handled systematically. Each step builds on the last, moving from raw data collection to essential financial adjustments and creating a complete period end checklist.

1. Gather and Code: Capturing All Financial Activity

This first phase ensures that every financial event from the month is recorded in your accounting system, such as QuickBooks for US companies or Xero in the UK. The goal is to capture all vendor invoices, log customer payments from platforms like Stripe, and categorize transactions from bank feeds and corporate cards like Ramp or Brex. This foundational step ensures the integrity of the data you will rely on for the rest of the financial close process.

Your aim should be 80-90% completion of transaction categorization before the month officially ends. By front-loading this work, you eliminate the data entry bottleneck that typically plagues the first few days of a new period.

For a pre-seed SaaS or Deeptech startup, this might be as simple as the founder spending a few hours reviewing the bank feed. For a Series A e-commerce company, it involves coordinating with the team to submit all receipts captured via a tool like Dext. The reality for most pre-seed startups is more pragmatic: focus on getting bank and card transactions coded correctly. Capturing this data early prevents the last-minute scramble to verify transactions, reducing the risk of material misstatements in your financials.

2. Reconcile and Verify: Ensuring Your Numbers Match Reality

Once your data is gathered, the next step is to confirm its accuracy. This function answers a critical question: do the balances in our accounting system line up with our bank accounts and other key records? The primary task here is the bank reconciliation, where you match every transaction in your accounting software against your official bank statements. This is a fundamental control for any business and is required under both US GAAP and UK FRS 102.

This goes beyond just bank accounts. For a professional services firm, it means reconciling project-based payments against invoices. For an e-commerce startup using Shopify, it involves reconciling payout reports to ensure sales, transaction fees, and refunds are accounted for correctly. Without this, you are effectively flying blind, unable to trust the cash balance or sales figures in your own reports.

A scenario we repeatedly see is that without this verification step, small discrepancies can compound over time, leading to an unreliable picture of your cash position. This checkpoint ensures the data you gathered is sound before you begin making accounting adjustments.

3. Adjust and Accrue: Building an Accurate Financial Picture

This final pre-close function elevates your accounting from simple cash tracking to a true reflection of business performance. It answers the question: what economic activity happened this month that isn't yet reflected in our bank transactions? This is the core of accrual-basis accounting, which means recognizing revenue and expenses in the period they are incurred, not just when cash changes hands.

For example, a biotech startup may engage a specialist consultant in May. The work is completed in May, but the invoice does not arrive until June. To get an accurate picture of May’s performance, you must record that expense in May by creating a journal entry. This typically involves debiting Consulting Expenses and crediting an Accrued Expenses liability account.

Another common adjustment involves prepaid expenses. A SaaS company might pay for its annual hosting contract in January. Instead of booking the entire cost that month and distorting January's profitability, it is recorded as a prepaid asset on the balance sheet. Each month, 1/12th of the total cost is recognized as an expense, correctly matching the cost to the period in which the service was used. Failing to record these adjustments on time obscures your true cash runway and profitability, making this step vital for accurate financial statements and investor reporting.

Scaling Your Pre-Close Process: A Staged Approach

Implementing an effective pre-close process should be progressive. At this stage, the process must be manageable and not create an excessive administrative burden. As your company grows, the complexity and formality of your closing procedures will evolve.

Pre-Seed and Seed Stage: Focus on the Fundamentals

For most early-stage companies, the focus should be on mastering the first two functions: Gather and Code, and Reconcile and Verify. Use a simple spreadsheet as your period end checklist to track these month end tasks. The priority is ensuring all cash and card transactions are correctly categorized and that your bank accounts are reconciled. This provides a solid, auditable foundation of accurate data even if the process is managed in a simple spreadsheet.

Series A: Formalizing Adjustments and Accruals

As you grow to Series A, the Adjust and Accrue function becomes more critical. Business complexity increases, and so does investor scrutiny. At this stage, your financial statements are used for more than just internal tracking; they are a key part of conversations with your board and potential new investors. Accuracy and timeliness are paramount. Your period end checklist should become more formalized, detailing specific accruals for key expense areas. It is also important to align your close calendar with key compliance dates, like VAT return deadlines in the UK.

Series B and Beyond: Implementing Controls and Automation

By Series B, your finance team is likely growing, and manual processes become a significant bottleneck. The pattern across high-growth startups is consistent: as the team and transaction volume grow, spreadsheets become unsustainable. A clear, documented process also becomes essential for onboarding new finance team members. A key control is to formally lock closed periods in your accounting software, like QuickBooks, to prevent accidental changes.

As a general rule, dedicated close management software should be considered when a finance team grows to three or more people. Systems like FloQast can automate checklists and reconciliations, but they are an optimization for a later stage. Starting with the three core functions provides a scalable foundation for your month end close process steps, giving you, your board, and your investors confidence in the numbers. For more, see the Close Calendar Design & Automation hub.

Frequently Asked Questions

Q: When should we start our pre-close activities?
A: Pre-close activities should ideally begin in the last 3-5 business days of the month. This provides enough time to gather most transactions and start reconciliations without waiting for the period to end. The goal is to perform key month end tasks proactively rather than reacting after the month has closed.

Q: What is the difference between a pre-close and a month-end close?
A: The pre-close involves preparatory tasks done before the month officially ends, like initial transaction coding and data gathering. The month-end close is the final process of making adjustments, running reports, and locking the books after the period is over. A good pre-close makes the final close faster and more accurate.

Q: How does a good pre-close process help with investor reporting?
A: A systematic pre-close process ensures your financial data is timely, accurate, and complete. This builds trust with investors by allowing you to deliver board reports on schedule. It also provides a reliable picture of your company's performance and cash runway, which is critical for strategic decision-making and fundraising.