A monthly close is the process of reviewing and finalizing the accounting activity for a completed month. Small businesses do not need a giant corporate accounting department to benefit from one. They need a repeatable checklist.
1. Confirm all bank and credit-card activity is imported
Before reviewing reports, make sure the accounting system contains the full month of activity for every business account.
2. Reconcile every balance-sheet cash account
Reconciliation compares the accounting balance with the financial institution's ending balance. Differences should be investigated rather than forced.
3. Review uncategorized transactions
Resolve holding accounts while the transactions are still recognizable.
4. Review accounts receivable and accounts payable
Old open invoices may represent collection issues, duplicates, credits, or transactions that were paid but not matched correctly.
5. Reconcile payroll
Compare payroll reports with wage expense, employer payroll tax expense, payroll liabilities, and cash withdrawals.
6. Review the Profit & Loss and Balance Sheet
Look for unusual negative balances, large swings, duplicated income, owner transactions recorded as expenses, and loan payments posted entirely to expense.
7. Save the final reports
Once the month is reasonably complete, save a Profit & Loss, Balance Sheet, and any other management reports the business uses.