Monthly bookkeeping: what to close each month

Why month-end is the job (not daily data entry)

Feeds and rules will post most of the month for you in QuickBooks Online or Xero. That is useful and incomplete. The close is where you catch the personal charge on the business card, the invoice you never sent, the loan payment that hit cash but never split interest, and the payroll tax that never left the liability account.

Do the weekly posting so the close is short. Do not confuse the two. A clean feed is not a closed month.

The checklist

Run this in order. Stop if cash does not reconcile.

1. Download or open every bank and card statement that ends on the last day of the month.
2. Reconcile each account so the register matches the statement ending balance.
3. Clear undeposited funds and unmatched payments. Money sitting there is usually a customer payment that never hit the invoice.
4. Age accounts receivable and accounts payable. Fix missing invoices and duplicate bills.
5. Post or review payroll and sales-tax activity for the month.
6. Scan the P&L for accounts that look wrong (negative expenses, a huge Miscellaneous, income that is actually a loan).
7. Run the balance sheet and walk the five checks.
8. Lock the period or at least stop editing that month unless you find a real error.

Reconcile bank and cards

Reconciliation means the books and the statement agree on one number: the ending balance. In QuickBooks Online, use Reconcile. In Xero, use Bank reconciliation and then the statement balance. Check off every cleared line. Investigate anything the bank has that you do not, and anything you have that the bank does not. The walkthrough and a worked example are in what is a bank reconciliation.

Credit cards are the same job. The card is a liability. Paying the card from checking is not an expense. If you expense the payment, you will double-count spending that was already coded when the charge posted.

Unpaid bills, open invoices, payroll

Open invoices are cash you have not collected. If an invoice is stale, decide: collect, write off, or send a statement. Do not leave 90-day balances because they make revenue look healthier.

Unpaid bills are cash you still owe. Enter the bill in the month you received the product or service if you are on accrual. Paying it next month does not move the expense if the bill was already recorded.

Payroll: the net pay and the tax payments should match the payroll reports. If you use Gusto or QuickBooks Payroll, import or post the journal. A leftover payroll-tax liability that never clears is one of the most common close misses.

Reports to look at before you file anything

Profit and loss for the month and for the year to date. You want to know whether operations made money, not just whether the checking account went up.

Balance sheet as of month-end. Read it with how to read a balance sheet.

AR and AP aging. These are the operational lists. The statements will not tell you who is late.

If you collect sales tax, the sales-tax liability report. File from that, not from memory.

How long this should take

A 1–10 person service business with one bank, one card, and a few dozen invoices: one to three hours if you posted during the month. A shop with inventory, job costing, or several cards: a half day is normal.

Catch-up work (six months of unreconciled feeds) is not monthly bookkeeping. Price that separately, then get back on a monthly cadence. If a firm quotes 'monthly bookkeeping' without a close, ask what reports you get and whether every account is reconciled.

Frequently asked questions