A month-end close is the routine that turns a month of transactions into numbers you can trust. Skip it, and small errors pile up until tax season, a loan application or an investor question exposes them all at once. Do it every month, and your profit and loss, balance sheet and cash position are always current. Here is the checklist we use for small businesses in QuickBooks Online and Xero.
Step 1: Get every transaction in
- Confirm bank feeds for every checking, savings, credit card, loan and payment processor account (Stripe, PayPal, Square, Shopify Payments) are connected and complete.
- Categorize or match every transaction in the bank feed. Nothing should be left “for review” or in Uncategorized.
- Enter any cash spending, owner-paid expenses and bills that arrived by email or mail.
- Record all customer invoices and sales for the month.
Step 2: Reconcile every account
Reconcile each bank and credit card account to its month-end statement, and loan balances to the lender statement. The reconciled balance must equal the statement exactly. Investigate uncleared items older than 60 days. Our bank reconciliation guide walks through it.
Step 3: Review receivables and payables
- Run an accounts receivable aging report. Follow up on anything past due and review old balances for write-off.
- Run an accounts payable aging report and make sure every bill is recorded and scheduled.
- Apply customer payments and deposits to the correct invoices, not as lump-sum income.
Step 4: Clear the clearing accounts
Undeposited Funds (QuickBooks), payment processor clearing accounts, payroll clearing and any suspense account should be at or near zero. A balance that keeps growing usually means deposits recorded twice or payouts never matched to sales.
Step 5: Post adjusting entries (accrual-basis businesses)
- Accrue expenses incurred but not yet billed, and revenue earned but not yet invoiced.
- Recognize deferred revenue earned this month, such as annual service plans and retainers.
- Book depreciation and amortization.
- Amortize prepaid expenses such as insurance and software paid annually.
- Record inventory adjustments from counts, and cost of goods sold.
- Book payroll accruals and employer taxes if payroll straddles month end.
Step 6: Review the reports
Compare this month’s profit and loss with last month and the same month last year. Large swings in any line usually mean a miscategorized transaction. Check the balance sheet for negative balances, old items and owner draws recorded as expenses. Then compare actual results with your budget.
Step 7: Lock the period
Set a closing date (QuickBooks Online: Settings → Advanced → Close the books; Xero: lock dates) so nobody changes a finished month by accident. Save the reconciliation reports and your month-end report pack.
| Task | Typical timing |
|---|---|
| Transactions and reconciliations | Days 1 to 5 of the next month |
| AR/AP review and adjustments | Days 5 to 8 |
| Reports reviewed and period locked | By day 10 |
Key takeaways
- Close every month, not just at year end.
- Reconcile every bank, card, loan and processor account to the statement.
- Clear the clearing accounts and review AR and AP aging.
- Lock the period once the reports are reviewed.
Rather hand it off? Our monthly bookkeeping service runs this close for you, and catch-up bookkeeping gets you current if months are behind.
Frequently asked questions
What is a month-end close in bookkeeping?
It is the monthly routine of recording every transaction, reconciling all accounts, posting adjustments, reviewing the financial reports and locking the period, so the month’s numbers are accurate and final.
How long should a month-end close take?
For most small businesses with current books, 5 to 10 business days after month end. It is much faster when transactions are categorized weekly.
How do I close the books in QuickBooks Online?
Go to Settings, Account and settings, Advanced, then Accounting, turn on Close the books and set the closing date. Add a password so earlier periods cannot be changed by accident.
What reports should I review at month end?
The profit and loss (compared with last month and last year), the balance sheet, AR and AP aging reports, and a budget-versus-actual report if you keep a budget.
