What we learned in the books.
Practical notes on the close, cash, margin, and the decisions growing companies get wrong. Written by the people doing the work. No predictions, no thought leadership.
Subscribing also unlocks the three checklists below: the month-end close calendar, the diligence readiness list, and the industry benchmark guide.
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Every tool here is free and none of them require a sales call.
Eight questions on how your books actually run. Get a score out of 16 and the order we would fix things in.
What building this finance function in-house would cost fully loaded, and how much less the same coverage runs with us.
Not summaries or teasers. These are the working documents, written out in full, in the form we actually hand to clients.
All three checklists are open below.
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Owner is the person who does the work. Reviewer is the person who signs off that it is right, and must never be the same person. Day numbers are business days after period end. Skip what does not apply to you, but do not reorder: each block depends on the one before it.
| Task | Owner | Reviewer |
|---|---|---|
| Publish the close calendar and confirm every owner has seen it | Controller | CFO |
| Chase open AP approvals so nothing sits unapproved into cut-off | AP | Controller |
| Confirm cut-off dates with sales and operations in writing | Controller | — |
| Run the last weekly bank and card reconciliation of the period | Bookkeeper | Controller |
| Task | Owner | Reviewer |
|---|---|---|
| Reconcile every bank account to statement, zero unexplained items | Bookkeeper | Controller |
| Reconcile all credit cards and expense platforms, code outstanding items | Bookkeeper | Controller |
| Reconcile merchant and payment processor settlements to deposits | Bookkeeper | Controller |
| Hard close AP entry for the period, no further postings | AP | Controller |
| Hard close AR invoicing and confirm all shipped or delivered work is billed | AR | Controller |
| Record all cash receipts and apply to invoices | AR | Controller |
| Task | Owner | Reviewer |
|---|---|---|
| Post accruals from the standing accrual schedule, not from memory | Controller | CFO |
| Accrue goods and services received but not invoiced, against open POs | Controller | CFO |
| Roll prepaid expenses and post the period amortisation | Bookkeeper | Controller |
| Roll deferred revenue and tie the schedule to the ledger balance | Controller | CFO |
| Accrue commissions, bonuses, and PTO movement | Controller | CFO |
| Accrue trade spend, rebates, and customer deductions where applicable | Controller | CFO |
| Post interest, debt amortisation, and lease entries | Controller | CFO |
| Task | Owner | Reviewer |
|---|---|---|
| Reconcile inventory to the warehouse or ERP system and explain variances | Operations | Controller |
| Review standard cost against actual landed cost, post variances | Controller | CFO |
| Assess obsolete and slow-moving stock, adjust reserve | Controller | CFO |
| Reconcile work in progress or unbilled services to project records | Controller | CFO |
| Reconcile payroll register to the general ledger and to tax filings | Bookkeeper | Controller |
| Post and eliminate intercompany balances, confirm both sides agree to zero | Controller | CFO |
| Reconcile sales tax and VAT liability to filings | Controller | Tax |
| Task | Owner | Reviewer |
|---|---|---|
| Complete the balance sheet reconciliation pack, every account supported | Controller | CFO |
| Review AR ageing, assess bad debt reserve | Controller | CFO |
| Review AP ageing for anything unexpectedly old or unexpectedly absent | Controller | CFO |
| Run flux analysis against prior month, prior year, and budget; explain every variance over threshold | Controller | CFO |
| Review margin by product, channel, or job against expectation | Controller | CFO |
| Scan the full journal listing for manual entries and confirm each has support | CFO | — |
| Lock the period so nothing can be posted behind the close | Controller | CFO |
| Task | Owner | Reviewer |
|---|---|---|
| Produce financial statements: P&L, balance sheet, cash flow | Controller | CFO |
| Produce the management pack with commentary, not just numbers | CFO | — |
| Update the 13-week cash forecast with actuals and reforecast | CFO | — |
| Check covenant compliance and calculate headroom | CFO | — |
| Hold the review meeting, and record the decisions taken in it | CFO | — |
| Log what went wrong this close and assign one fix before next period | Controller | CFO |
Run this for three consecutive months before judging it. The first close against a real calendar always overruns, because it surfaces work that was previously being skipped rather than done. The second is close to schedule. The third tells you whether the process holds or whether a specific step needs an owner it does not currently have.
Diligence rarely fails on performance. It fails on substantiation. Build these before a process opens and confirmatory diligence takes two weeks. Build them during one and it takes two months, at the moment your attention is least available and your leverage is falling every week.
| Schedule | What it has to prove | Build time from cold |
|---|---|---|
| Revenue recognition, contract by contract | That revenue was earned in the period it was recorded, traceable to a signed contract and a delivery event, with a deferred revenue schedule that ties to the ledger every month across the review window. | 3 to 8 weeks |
| Quality of earnings starting point | Which costs are genuinely one-time, which are owner-related, and which are non-recurring, tracked contemporaneously rather than argued for retrospectively. | 2 to 4 weeks |
| Monthly working capital detail | A clean monthly series across at least 24 months for AR, AP, inventory, and accrued items, so the working capital target in the purchase agreement is set from your data rather than the buyer's assumption. | 2 to 5 weeks |
| Fixed asset register | That every asset on the schedule exists, every asset in service is capitalised, and the register reconciles to the balance sheet and the depreciation charge. | 1 to 3 weeks |
| Multi-state and multi-jurisdiction tax exposure | Where you have nexus, where you are registered, where you are filing, and a quantified estimate of any accumulated sales, income, and payroll tax exposure. | 3 to 6 weeks |
| Contracts and commitments register | Every lease, licence, customer agreement, supplier commitment, and employment term in one indexed place, with change-of-control and assignment clauses flagged. | 2 to 4 weeks |
Answer honestly. Any no is a work item.
| Question | What a no means |
|---|---|
| Could you hand over three clean years of financials within two weeks, without pulling anyone off their job? | You will be reconstructing under time pressure. Start now. |
| Does your deferred revenue balance have a schedule behind it that ties every month? | Every period in the review window is potentially wrong. |
| Have your last three years been closed on a consistent basis, with no policy changes mid-window? | Buyers will normalise the whole window to the least favourable treatment. |
| Is your inventory or WIP reconciled to a physical or system count every month? | Expect a balance sheet adjustment and questions about everything else. |
| Do you know, in writing, which states or countries you have nexus in? | Unquantified exposure is discounted harder than known exposure. |
| Can you produce a monthly P&L by product line or segment for 24 months? | You cannot defend the growth story with the detail that supports it. |
| Is there a single index of all material contracts? | Weeks of assembly, and the delay reads as disorganisation. |
| Are related party transactions identified and documented? | This is the finding that most often changes the tone of a process. |
If you have twelve months, fix revenue recognition first, because it affects every other number in the window and cannot be corrected quickly. Then working capital detail, because the target it sets has direct cash consequences at closing. Then tax exposure, because quantifying it removes the buyer's licence to assume the worst. The fixed asset register and contracts index are administratively straightforward and can be done last. The quality of earnings starting point should be maintained continuously from now on, whether or not a transaction is in view, because it costs almost nothing to track contemporaneously and a great deal to reconstruct.
These are the working ranges we use to orient ourselves in the first weeks of an engagement. They are directional, drawn from our own client base and public filings, and they vary considerably by business model within any industry. Use them to decide what to investigate, never as a target in themselves.
| Metric | Healthy | Investigate |
|---|---|---|
| Days to close the books | 5 to 10 business days | Beyond 15 |
| Forward cash visibility | 13 weeks, reconciled weekly | Under 4 weeks |
| Unexplained balance sheet items at close | Zero | Any recurring item |
| Budget to actual variance on operating expense | Within 5 percent | Beyond 10 percent, or unexplained |
| Manual journal entries per close | Falling quarter on quarter | Rising, or unsupported |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin, all landed and variable order costs in COGS | 35 to 55 percent | Under 30 percent |
| Contribution margin by channel | Positive on every channel | Any channel negative after freight and deductions |
| Inventory turns per year | 4 to 8 | Under 3 |
| Trade spend as percent of gross sales | 8 to 18 percent, accrued not cash | Unaccrued, or unknown by customer |
| Days in AR | 30 to 45 | Beyond 60 |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin, platform and fulfilment fees in COGS | 45 to 65 percent | Under 40 percent |
| Contribution margin after paid acquisition | 15 to 30 percent | Under 10 percent |
| Blended acquisition cost payback | Under 6 months | Beyond 12 months |
| Returns and refunds as percent of gross sales | Under 10 percent, accrued | Unaccrued, or above 15 percent |
| Inventory turns per year | 5 to 10 | Under 4 |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin, hosting and support in COGS | 70 to 85 percent | Under 65 percent |
| Net revenue retention | Above 100 percent | Under 90 percent |
| Gross logo churn, annual | Under 10 percent | Above 20 percent |
| Acquisition cost payback | Under 18 months | Beyond 24 months |
| Deferred revenue schedule ties to ledger | Every month | Quarterly or never |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin, delivery labour in COGS | 35 to 55 percent | Under 30 percent |
| Billable utilisation | 65 to 80 percent | Under 55 percent |
| Realisation against standard rate | Above 90 percent | Under 80 percent |
| Unbilled WIP in days | Under 20 | Beyond 35 |
| Days in AR | 35 to 50 | Beyond 65 |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin | 25 to 40 percent | Under 20 percent |
| Standard to actual cost variance | Within 3 percent | Beyond 5 percent, or not measured |
| Inventory turns per year | 4 to 8 | Under 3 |
| Scrap and rework as percent of cost of sales | Under 3 percent | Above 6 percent, or unmeasured |
| Cash conversion cycle in days | Under 60 | Beyond 90 |
| Metric | Healthy | Investigate |
|---|---|---|
| Gross margin by job | 15 to 30 percent | Under 10 percent, or unknown by job |
| Estimate to actual variance at completion | Within 5 percent | Beyond 10 percent |
| Underbillings on the balance sheet | Minimal and explained | Growing, or unexplained |
| Retainage as percent of AR | Tracked separately | Not separated from current AR |
| Backlog in months of revenue | 6 to 12 | Under 3 |
Pick the three that matter most for your business and measure them monthly for a quarter before comparing to anything. Most companies discover that two of the three cannot currently be produced from their ledger at all, which is itself the finding. A metric you cannot calculate reliably is not a benchmarking problem; it is a reporting problem, and it needs fixing before the comparison means anything.
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