The monthly close is what separates books that are kept from books that exist. Its purpose is not tidiness; it is that on the tenth of every month the owner sees last month's numbers and can believe them. Here is the list we run for every client, in the order that avoids rework.
Before starting
All bank and card feeds updated through the last day of the month. Platform reports downloaded (Stripe, Shopify, Amazon, PayPal). Payroll journals available. Any bills or invoices dated in the month entered.
Cash and cards
- Categorise every feed transaction; apply rules for recurring payees; flag unknowns for the owner in one batch.
- Reconcile every bank, card and payment-platform balance to the statement. Investigate every difference; do not force it.
- Match transfers between accounts so they are not doubled as income or expense.
- Clear stale uncleared items: a cheque uncleared for three months is a question, not a reconciling item.
Revenue
- Post platform sales as monthly summaries: gross sales, refunds, discounts, fees, sales tax collected, and the payout that ties to the bank.
- Review accounts receivable: invoices issued, payments applied, overdue balances chased or written down.
- Deferred revenue: annual or upfront payments recognised for the month, remainder on the balance sheet.
Costs
- Accounts payable: bills entered with the right date, paid bills matched, unpaid bills sitting as liabilities.
- Accruals for costs incurred but not yet billed (contractors, usage-based services); prepayments spread (insurance, annual software).
- Cost of goods sold and inventory: month-end count or system value, COGS adjusted so the margin is real.
- Payroll tied to the payroll provider's reports: gross wages, employer taxes, benefits, liabilities cleared when paid.
Balance sheet
- Sales tax liability agrees to what was collected and what was filed.
- Loans: interest and principal split; balance agrees to the lender's statement.
- Fixed assets: purchases over the capitalisation threshold added; depreciation posted.
- Owner accounts: contributions, draws and personal spending booked to equity, never to expenses. For foreign-owned LLCs this is the Form 5472 ledger.
- Suspense and uncategorised accounts at zero. If they are not, the close is not done.
Review
- Compare the profit and loss with the prior month and the same month last year; explain every line that moved more than expected.
- Balance sheet reasonableness: negative cash, negative liabilities and a growing "ask my accountant" balance are all errors.
- Lock the period so nothing changes after the statements go out.
- Send the pack: profit and loss, balance sheet, cash summary, open questions, and three sentences on what changed.
What to look at when it is done
Cash in the bank and the runway it represents at this month's burn. Gross margin, and whether it moved. Receivables over 60 days. Sales tax and payroll tax set aside versus owed. Owner draws against profit. Five numbers, ten minutes, every month; that is the return on the close.
The check: when did you last receive a profit and loss for a month within two weeks of its end? If the answer is "never" or "at tax time", the close is the thing to fix.