How to Run a Simple Month-End Close

Complete your monthly accounting close in 5 steps: reconcile accounts, record accruals, review P&L, and lock the books.

1. Reconcile all bank and credit accounts. Pull bank statements for every business account and credit card. Match every transaction in your accounting system to the bank record. Flag unrecorded transactions, bank fees, and timing differences. Your book balance plus outstanding checks minus deposits in transit should equal your bank balance.
2. Record month-end accruals and adjustments. Book expenses incurred but not yet paid: utilities, rent, contractor invoices received after month-end. Record depreciation on equipment and vehicles. Defer any prepaid expenses like insurance or software subscriptions to match the expense with the period it covers.
3. Review accounts receivable and payable. Confirm all customer invoices are recorded and aged correctly. Write off any receivables over 120 days that you've determined are uncollectible. Verify all vendor bills received are entered and properly coded to expense accounts or assets.
4. Generate and review financial statements. Run your P&L and balance sheet for the closed month. Compare revenue and major expense categories to budget and prior month. Investigate any variances over 10% or $5,000, whichever is smaller for your business size. Verify your balance sheet balances and all account balances look reasonable.
5. Lock the period and document issues. Set your accounting system to prevent further changes to the closed month. Document any unusual transactions or adjustments in a close memo. Note any process improvements for next month's close. File supporting documents for major journal entries.