Month-End Close Checklist for Small Businesses
"Month-end close" sounds like something reserved for a large corporation with a finance department and 17 people named Steve in accounting.
It isn't.
Small businesses can benefit from a simple month-end bookkeeping process too.
You don't need a massive checklist.
You need a consistent routine that helps you make sure your financial records are current and your reports actually make sense.
What Is a Month-End Close?
A month-end close is essentially the process of reviewing and finalizing your financial records for the month.
For a small business, that might include:
Reconciling bank accounts
Reconciling credit cards
Reviewing income
Reviewing expenses
Checking accounts receivable
Reviewing accounts payable
Reviewing financial statements
Identifying unusual transactions
The goal is to finish the month knowing that your books are reasonably complete and ready to review.
1. Reconcile Your Bank Accounts
Start with the basics.
Compare your bookkeeping records with your bank statements.
If the ending balances don't make sense, investigate before moving forward.
2. Reconcile Credit Cards
Credit card accounts deserve the same attention.
Make sure purchases have been recorded and that payments aren't being accidentally treated as expenses.
This is a common area where bookkeeping errors can occur.
3. Review Your Income
Look at the revenue recorded for the month.
Does it make sense compared with your actual business activity?
If sales were significantly higher or lower than normal, figure out why.
Your bookkeeping should help you understand the numbers, not just record them.
4. Review Your Expenses
Look for unusual increases.
Did software expenses jump?
Did advertising increase?
Did you make a major purchase?
Did contractor costs change?
You don't need to panic every time a number changes.
You do want to understand the reason behind the change.
5. Review Accounts Receivable
If customers owe you money, don't ignore that number.
Look at outstanding invoices and determine which customers are current and which invoices require follow-up.
Revenue isn't particularly helpful if you aren't collecting it.
6. Review Accounts Payable
Look at what your business owes.
Upcoming bills and unpaid vendor invoices affect cash flow.
Knowing what is coming due helps you make better decisions about the money currently sitting in your bank account.
7. Review Your Profit and Loss Statement
Your profit and loss statement should tell you how the business performed during the month.
Look at:
Revenue
Cost of goods sold, if applicable
Operating expenses
Net income
Then compare the current month with prior months.
Patterns are often more useful than a single month's results.
8. Review Your Balance Sheet
Don't stop at the profit and loss statement.
Your balance sheet shows what the business owns, what it owes, and the owner's equity.
This can help you understand changes in:
Cash
Accounts receivable
Inventory
Equipment
Loans
Credit cards
Other liabilities
9. Ask Questions About the Numbers
This is the part many small business owners skip.
Don't just look at the reports.
Ask questions.
Why did revenue change?
Why are expenses higher?
Why is cash lower?
Why are receivables increasing?
Why did the loan balance change?
Your bookkeeping becomes much more valuable when you're using it to ask better business questions.
Final Thought
You don't need a corporate accounting department to have a month-end close process.
You need a repeatable routine.
A simple monthly review can help you catch bookkeeping issues sooner, understand your financial performance, and make decisions using current information.
And honestly, spending a little time reviewing your numbers every month is a lot easier than trying to understand an entire year's worth of transactions at once.
Aurrera Bookkeeping provides monthly bookkeeping support designed to help small business owners keep their financial records current and useful throughout the year.
