The Briefing: 6 steps for ensuring a successful close

Editor’s note: The Briefing is our series highlighting strategic projects and insights from experienced finance pros. Follow us on LinkedIn or Twitter to get alerts for new briefings.

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Last year was an incredibly busy one for our finance team: we transitioned to NetSuite and switched from a PEO to a new payroll provider, all while managing to cut our monthly close time in half. On top of that, we were hard at work on our 2022 accounting close, which just recently wrapped up. New entities, products, and goals meant that we had our work set out for us. Here are six steps our team took to ensure a successful close.   

1. Start early

Last year, we were closing within 20 days and only had one audit that had to be done by June. This year, the amount of audits has tripled, the timelines have shortened, and we’re pacing to close within five days by July 2023.

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We began planning our year-end close in October, which is two months earlier than we’ve done in the past. We are on a tight timeline to submit our trial balances and documents to our auditor, Deloitte, by the end of this month. We also have two audits that must be completed by the end of March due to the launches of our new products that require us to obtain money-transmitter licenses in the different states where we operate. Because the scope of our work has increased, strategizing early was a necessity. 

2. Align on top priorities 

As part of this planning process, we prioritized certain tasks ahead and assigned them out. In order to avoid chaos during this busy time of the year, it was imperative for everyone to understand who was owning what and to establish timelines.

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A key part of this was also prioritizing and aligning with the executive team. For example, we agreed with them on performing two separate accounting closes:

• The first close (our regular eight to nine day close) satisfied the needs of our finance team and provided our routine financial statements for our monthly finance review with senior leadership. 
• The second close (in the last two weeks of January) allowed us more time to work on the technical accounting entries and time-intensive entries, such as IP capitalization, in order to fulfill the requirements of US GAAP and to provide accurate trial balances to our auditors.

3. Assign tasks and prioritize key accounts

Next, we worked on assigning out tasks by close functions. Here are some of my team’s top priorities:

• Payroll reconciliations: Payroll expenses usually represent more than 50% of all operating expenses and as such, it is important to ensure the accuracy of the expenses recorded. As part of our close this year, we are preparing payroll reconciliations to make sure that the amounts that we have in our payroll ledgers agree with those downloaded directly from our payroll provider (W2s sent to the employees). We’re ensuring that the payroll expenses make sense in our book and we are also preparing for our audits (auditors always ask for the payroll reconciliations). Our payroll accountant, Micka, spearheaded the payroll reconciliations with the support of our corporate accounting manager, Audrey.
• P&L: Part of the close is to make sure that we are ready for auditors. As Ramp has expanded into different products, we have a significant volume of transactions. Most of our expenses are categorized automatically through our Bill Pay products or our credit cards. Another review of such categorization is done through our operating bank accounts. These bank accounts need to be reconciled and my team checks that the amounts that we have in the bank agree with our ledgers and that all the transactions are properly categorized. 
• Additionally, we perform detailed reviews of each of the significant expense ledgers with our FP&A team to verify that no expenses are miscategorized, to reconcile our rent expenses with our deferred lease expenses schedule, and to review our legal expenses for any missed accruals. Our AP accountant, Sammy, is responsible for reviewing such expenses and ensuring that the categorizations are appropriate and that the expenses are complete.
• Other significant team expenses: Other significant expenses that we needed to make estimates for are marketing and legal expenses. My team followed up with the sales, growth, marketing, and legal teams to confirm that we had an extensive and accurate list to make the right accruals for 2022 for any invoices not yet received.
• What about revenue and COGS expenses? The good news for these accounts is that we prepared our reconciliations monthly and ensured that our books are fully reconciled at the end of each close. For this year-end close, our accounting manager, Joe, and our senior accountant, Andrey, invested additional time to compile all the reports needed for audit support. They also worked with our risk, engineering, and data teams to collect all the data needed for our auditors.  

4. Bring on technical accounting help

The FASB (Financial Accounting Standards Board) has new standards that come out every year and are applicable to either public or private companies. Ramp is a private company but still needs to comply with these new standards. For example, this year we applied ASC 842 which is the new lease accounting standard. We outsourced the technical analysis to a top tier consulting company with significant experience with our auditors. They also provided us with the technical accounting analysis for our warrants journal entries.

5. Review account mapping 

As I mentioned earlier, we launched new products in 2022 and subsequently had to map these new products to the right financial statement lines in our balance sheets and P&L. Account mapping is an important part of financial storytelling and it’s important to make sure that the mapping is done in conjunction with what management or the executive team wants to project.

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Take the time to review your account mapping if you have new accounts, products, functionalities, revenue, COGS, or expenses lines. Where an account is situated in the financial statements is a strong indication of the maturity and intention of the business. Additionally, changes in the future might not be possible due to the basic accounting concept of consistency. 

6. Ask ‘what would an auditor ask for?' 

As a former auditor myself, I understand that documentation is paramount and try to build my files with audit in mind. In a startup environment, we are often pressed on time and compelled to make quick decisions and book entries and occasionally forget to retain the right documentation in the process. While we’ve all been guilty of this at times, our team does our best to be mindful about documenting and backing up everything: entries, assumptions, thresholds, and approvals. You want to not only be able to go back and retrace your steps, but make it easy for a third-party to come in and easily understand what you've done and why you've done it. As an auditor would say, “if it is not documented, it is not done.” Be diligent and use common sense. 

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Small initiatives can add up to real momentum 

By planning ahead, aligning on priorities, assigning tasks, using external resources when necessary, reviewing account mapping, and putting ourselves in an auditor’s shoes, we set ourselves up for successful year-end audits and a smooth month-end close process. We plan to continue implementing these tactics to help next year run even better.