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CFO tips and tricks:

How to manage month-end close
like a pro
 How to manage month-end close like a pro

Contents

The digital transformation 1

Chapter 1. Tips to close the month like a pro 2

Gathering financial information 2
Tax 3
Actual vs. budget 3
Planning 4

Chapter 2. Your essential checklist to close the month/year smoothly 5

Chapter 3. Common mistakes to avoid (UK) 6

Financial statements and expenses 6
Corporation Tax 6
VAT 7

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 How to manage month-end close like a pro 1

Introduction
When we talk to our leads and customers, we always hear that the biggest headache for finance teams is closing the month and
financial year. With this guide we want to help you close it like a pro and avoid any last-minute surprises. We talked to a handful of
CFOs from multiple industries and asked them to share their most essential tips.

In chapter one, you’ll find a summary of the CFO’s answers related to closing the books, budgets, and the SaaS tools they use.
In chapter two, there’s a super quick checklist for you to use when you start the month, quarters, or even year-closing process.
And in chapter three, you can dig into the most common mistakes finance teams make when it comes to financial statements
and taxes (this section is particularly relevant for UK finance teams.)

The digital transformation

Soon enough, closing the month and year will be an automated process for finance teams. Managing company spend with
company cards will eliminate the need for cash in most cases and allow finance teams to manage all transactions digitally.

But, cashless companies aren’t the only trend in business digitalisation. Collaboration tools, cloud finance, and accounting plat-
forms have all increased in popularity due to remote working and created benefits that are here to stay.

Many Governments are making the digital transition mandatory. For example, the Making Tax Digital initiative in the UK, and the
Germany GoBD, have been created to store information electronically and handle tax-relevant documents.

How does digitisation look in practice? Tata, the automotive giant, decided to go Enterprise Agile by 2020. Taking on this
challenge meant digitising several business processes in a company of more than 450,000 employees across 47 countries. It
was worth it. Today, they can have their P & L on the first day of the month, giving their business leaders real-time information to
make strategic decisions quickly. It met its goal of finding the best technology to increase the simplification, digitalisation, and
automation of the financial closing.

Payhawk supports businesses in making stra-

tegic decisions regarding forecasting, planning
budgets, and managing cash flow. Our payments
and expense solution comes with transparent
reporting that lets finance leaders optimise their
spend and processes.
 How to manage month-end close like a pro 2

Chapter 1

Tips to close the month like a pro

First of all, closing the month or year is not a one-person project, so gather the team that’s going to help you. If you
were overwhelmed trying to do all the tasks previously, look into hiring someone temporarily or ask for support from an
external accounting firm.

As the information needed to close the financial statements comes from various sources, you should inform your team
members about the closing schedule ahead of time with tangible deadlines. When closing the year, be aware that your
team may struggle to fit in all the hours needed to close as the holidays approach, especially with time off booked, so
plan accordingly. Try to be flexible if some information is taking more time to gather. And finally, take a look at last year’s
audits to refresh what worked and what didn’t.

At Payhawk, we value customer feedback tremendously. Thanks to our customer feedback, we continuously improve
our product, build our roadmap, and share insights via our content.

For this chapter, we asked six CFOs — three from Spain and three from the UK — four questions. Here’s a summary of
their tips to close the books efficiently, both monthly and annually.

Gathering financial information

How do you ensure you receive all financial information each department, and the CEO to gather all the info.
relevant for the year? Do you use any tools/SaaS products/  My finance team has a checklist that they go over every
have meetings with business stakeholders/legal, etc.? month and at the end of the year, so all the information we
need is there.
 We gather all the information from the ERP we use,
Holded.
 We collect the information from our monthly closings. In
2022 we want to have the accounting in-house and start With Payhawk, you can forget chasing your em-
using Netsuite. ployees for invoices to close every month or year.
 It’s still a pretty manual process, as it comes from different Every time your team uses a Payhawk card or pays
sources: accounting system, bank statements, and legal with personal funds, they just snap a picture of the
receipt with their smartphone, add it to the app, and
team.
the job’s done.
 We use third-party audit evidence and document judge-
ments (normally done by email), Excel reminders, month-
end processes, and save copies of invoices.
 We have meetings with budget owners to go over all of
the costs that have hit the P&L. Plus; we make sure that all
employees have submitted their expenses.
 We have meetings with the finance team, the heads of
 How to manage month-end close like a pro 3

Tax Actual vs. budget

How do you ensure the accuracy of your monthly/annual How important is budget accuracy for your business?
tax returns? Do you use any tool/SaaS where you have all What actions do you take in case of significant gaps/
relevant information? over-delivery? Do you use any tool/SaaS to monitor the
actual vs. budget performance?
 All our information is registered in our ERP as we do
monthly tax returns.  Budget accuracy is essential for us. But it’s definitely
something we can improve.
 Our accounting firm handles all our taxes, they’re in
charge of the tax returns, and we have total faith they’re  We work with projections a lot, and we adjust them fre-
quently if we need more funds or to divert from another
accurate. We only send them the information month by
budget item. Tools: only Excel.
month.
 No tools. Just export P&L and hand it over to the tax  Accuracy is super important. We do the budget plan, then
see the actual spend from the accounting system, and
consultant.
then export it to our comparing tool, Adaptive Planning.
 Different people do the day-to-day bookkeeping and the
review of the VAT return, so two sets of eyes. Regarding
 The budget process is essential for each department
head, so they are empowered. The finance team should
tools: I haven’t found one, so I use Excel.
focus on having budget and actuals on the same ac-
 Internally, we do a thorough revision of the Corporation
counting basis, so it’s easy to analyse.
Tax. But apart from that, all our tax is managed by an inde-
pendent third party. There is no SaaS tool as everything  Budget accuracy is crucial to ensure profit targets that
depend on accurate sales and margin and cost forecast-
is externalised.
ing. Reforecasting should take place every quarter.
 Budget accuracy is vital for the decision-making in the
company, especially in the last two years that we grew x3.
In the future, I would like to use the SaaS tool Abacum.
Payhawk enhances the accuracy of invoice capture
and VAT coding. You can also use Payhawk to iden-
tify invoices for prepayments, accruals, or any other
month-end process through custom fields. Payhawk allows you to track your company
spend in real-time, rather than having to wait for
finances at the end of the month. One of our cus-
tomers says, “it’s like a pilot cockpit for company
expenses.”
 How to manage month-end close like a pro 4

Planning Star tips for closing the books

How do you learn about new tax legislation/changes? smoothly:
When do you prepare the monthly budget or for the next
fiscal year?
 Start preparing early so that you can solve any discrep-
 I trust my accounting firm to be up-to-date. ancies. Spread out the work of monthly closing.

 Currently, the accounting firm supports us with that, but  Bookkeeping is done best little and regularly:
we’ll be up-to-date as soon as we have in-house account-  Daily or Weekly Bank Reconciliations
ing and a good ERP in place.  Monthly Supplier Statement Reconciliation and fort-
Next year’s budget should be planned in Q3 and signed nightly payment runs
by the management team in Q4.  Effective credit control procedures and sending of
 Tax legislation is typically held externally. If you’re ex- customer statements
panding into new territories, you would expect a special-  Be organised during the year and make sure your AP and
ist tax advisor to have already been in contact. However, AR are clean.
PwC and KPMG give tax fact sheets which can be very  Do the same process every month. Have a clear calen-
helpful for new jurisdictions. dar and checklist and assign leads. Include controls in
 The budget’s usually completed by October, then re- the month-end process so you can understand if errors
based once the year has closed. can emerge and how to correct them.
 Focus on strong balance sheet reconciliations tied to
third-party audit evidence where possible.
 Have robust and consistent processes and procedures
With Payhawk company cards, finance depart- in place throughout the year.

ments can have day-to-day budget controls with  The responsibility workflow should be 100% clear to
team cards and individual fund requests.. It also the whole team and use tools like Trello or Gantt charts to
allows setting up budget management per cost avoid bottlenecks.
centre and tracking payments and expenses in  Create segregation of duties controls for preparers and
real-time. reviewers, especially on key balance sheet reconcilia-
tions, e.g., Bank, AP, AR, VAT, etc.
 How to manage month-end close like a pro 5

Chapter 2

Your essential checklist

to close the month/year smoothly
Before you start B Performance management

Variances forecast vs. actual, budget vs. actual

Gather the team
Are the variances one-off or systemic? Do they have
Prepare a closing schedule & distribute tasks among
future forecast implications?
team members
Update forecast
Look over last year’s audits (for the year-end closing)
Identify key messages for key stakeholders

Closing the books

C Review and improve month-end tasks
A Complete bookkeeping and tax returns
Spread bookkeeping over the month
Review all expenses and post all supplier invoices Capture of expenses and receipts & correct coding at
Raise all sales invoices source including VAT
Reconcile the bank accounts Analytical review of the VAT position and VAT calculation
Review AR and consider any overdue debts for bad debt of effective rates
provision Obtaining audit evidence and assumption evidence for
Review AP and reconcile key AP balances to supplier judgemental areas
statements Manual steps being automated
Review the general ledger codes for any incorrect coding
or consideration for capitalisation to fixed assets
Allocate out payroll to appropriate cost centers if appli-
cable
Review the P&L for any accounting adjustments (revenue
recognition, prepayments,...)
Update the fixed asset register and consider depreciation
Review Balance Sheet Reconciliations and reconcile to
appropriate sources of third party evidence
Consolidate Entities together if required. Including con-
solidation adjustments
Prepare for Performance management
 How to manage month-end close like a pro 6

Chapter 3

Common mistakes to avoid (UK)

Here, we dig into some of the most common mistakes business owners and CFOs make while filing their documents
to Companies House and HMRC. We gathered this data from several different accounting and tax websites (see foot-
note for references).

Take a quick look to save any issues with your own information and avoid penalty fees in the future.

Financial statements Corporation Tax

and expenses Company directors are responsible for filling out corpora-
tion tax returns, submitting to HMRC, and paying them on
Whether your accountant is in-house or not, having proper
time. If there are any mistakes, the person responsible isn’t
accounts is very important, especially if you want to ask
the accountant who filled them in, but the director — and
for a loan, as banks will always ask for these documents.
that could be you.

Here’s a quick list of mistakes to avoid when filling in your

Some common mistakes are as follows:
financial statements:

 Be sure that your accountant fills in the correct financial  Once you’ve received a notice for the corporation tax
statement under Companies House. Check if you’re return, you normally have three months to send it. Plan
qualified as a small or micro business. You’re also exempt ahead as this process takes a bit of time. You have no
from filing a profit and loss account as a small business. excuse to be late as this process is all online.
 The details of your directors, secretary, address, and  Ask for professional advice to be sure all the numbers are
share issuance should be up to date (Confirmation State- correct. There are so many tax reforms that it’s impossi-
ment and Annual Return). ble to keep up.
 Make sure you understand which directors to include  Don’t be late with your payment. HMRC mentions that
as employees. If directors have a contract, make sure you must pay nine months and one day after the end of
they’re included when disclosing the number of employ- your accounting period. Your accounting period is usually
ees. your financial year, but you may have two accounting
 Check that you have the correct status of your employ- periods in the year you set up your company.
ees, and these don’t differ from what HMRC has on file.  If you have more than £1.5 million in profits, you must pay
You might have freelancers on your team, while on paper, your corporation tax in instalments.
they’re not part of your payroll (legislation IR35).  If you realise you made a mistake, contact your accoun-
 Travel expenses. To deduct these, remember that the tant ASAP, as they will know how to deal with HMRC.
sole purpose of the trip has to be business-related.
 How to manage month-end close like a pro 7

VAT
Accountex mentions that small businesses spend more than Other frequent mistakes:
86 minutes reviewing the VAT returns numbers, and 51% of
these business owners have made mistakes. To prevent VAT  Lack of VAT consistency controls, e.g VAT code check by
errors, you should look into HMRC-approved accounting the suppliers.
software like Xero and Quickbooks, which have dedicated  Not including the UK VAT on the value of the supplies
VAT packages. Payhawk has direct integration with both of received from overseas under the reverse charge proce-
these accounting software packages; read more here. dure.
 Waiting to account VAT when receiving the total amount
Some common mistakes include reclaiming: of deposit. In whole or in part, any receipt of payment
creates a tax point for VAT purposes.
 VAT for fuel or motor vehicles if used for personal and  Watch out when you do property VAT, as this area is
business needs. known to be particularly complex.
 VAT for expenses in food, drink, accommodation, or
events to entertain your customers.
 Business expenses without invoices. No evidence=no
VAT claim.
 Import VAT without the C79 certificate from HMRC.
 How to manage month-end close like a pro 8

Legal disclaimer
The information provided in this paper does not, and is not intended to, constitute legal, financial and/or tax
advice. Instead, all information and content available herein is for general informational purposes only. The infor-
mation presented herein may not reflect the most current legal developments. Readers of this paper should consult
with a qualified expert to obtain advice with respect to any particular legal, financial and/or tax matter. No reader of
this paper should act or refrain from acting on the basis of information contained herein without first seeking legal,
financial and/or tax advice from an appropriate counsel in the relevant jurisdiction. Payhawk disclaims all liability in
respect to actions taken or not taken based on any or all of the contents of this paper to the fullest extent permitted
by law.

References
Websites consulted for Chapter 3:

Bytestart, 2021, How to avoid corporation tax mistakes,

https://www.bytestart.co.uk/corporation-tax-mistakes;

Patterson Hall Accountants, 2021, 14 common errors in financial statements,

https://www.pattersonhallaccountants.co.uk/14-common-errors-in-financial-statements;

Bytestart, 2021, 21 costly VAT mistakes,

https://www.bytestart.co.uk/costly-vat-return-mistakes-businesses;

Hiscox, 2017, Common tax return errors made by small businesses and the penalties HMRC can impose,
https://www.hiscox.co.uk/business-blog/common-tax-return-errors-made-small-businesses-penalties-hmrc-can-impose;

Accountext, 2019, VAT errors spark tax overpay by small companies,

https://www.accountex.co.uk/insight/2019/08/05/tax-overpay;

Menzies, 2019, How to avoid the top 10 errors at VAT Inspections,

https://www.menzies.co.uk/top-10-errors-at-vat-inspections
 About Payhawk
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