What actually happens in a monthly close

A monthly close is the routine that turns a month of transactions into numbers you can trust. Done every month, it's quick. Skipped for a year, it becomes a cleanup project.

Step 1: Get every transaction in

Bank and credit card feeds bring most transactions in automatically, but not everything: checks, cash, loan payments and transfers between accounts often need attention. The goal is a complete record for the month.

Step 2: Categorize

Each transaction is assigned to the right income or expense account. Consistency matters more than perfection here; the same kind of expense should land in the same place every month so trends mean something.

Step 3: Reconcile

Every bank and credit card account is matched to its statement so the ending balance in the books equals the ending balance on the statement. This is the step that catches duplicates, missing items and errors.

Step 4: Review receivables and payables

The A/R aging report shows who owes you and for how long; the A/P aging shows who you owe. Reviewing both each month surfaces slow-paying customers and bills that need attention before they become problems.

Step 5: Review and deliver reports

The profit and loss and balance sheet get a sanity check against last month and last year, then go to the owner. Anything unusual gets a question, not a guess.

Why monthly beats yearly

Questions are easier to answer while the month is fresh. Problems like an unpaid invoice or a duplicate charge get caught in weeks instead of discovered at tax time. And at year-end, there's very little left to do but hand your CPA a clean package.

Want to run your own close? Use the free month-end close checklist. Or let us handle it: every monthly plan includes the full close.