The monthly close, explained on one page
What gets reconciled each month, in what order, and why a steady monthly close turns tax season into a simple handoff to your tax professional.
By Lois Margolin, CPA
A monthly close is the short routine that turns a month of transactions into numbers you can trust. When it happens every month, tax season stops being a scramble and becomes a handoff: your tax professional receives books that already add up.
What gets done, in order
- Every bank and credit card account is reconciled to its statement, so the balance in your books matches the balance at the bank to the cent.
- Accounts payable and receivable are reviewed. Who owes you, whom you owe, and what is late.
- Payroll and sales tax entries are matched to what was actually filed and paid.
- Unusual items are explained or corrected: duplicate charges, personal expenses on the business card, deposits that are not income.
- Statements are delivered: profit and loss, balance sheet and cash flow, with a comparison to the prior period.
Why monthly, not once a year
An error found in the same month takes minutes to fix. The same error found eleven months later can take hours, because the receipt is gone and nobody remembers the charge. A monthly close also catches fraudulent charges early, while there is still time to dispute them.
Clean, tax-ready books are not a year-end project. They are twelve small closes.
Signs your close is slipping
- You cannot say what your cash balance will be in 30 days.
- Your tax professional asks for the same documents every spring.
- You find out about a late vendor payment from the vendor.
If a step keeps slipping, that is the first thing a concierge accountant takes off your desk.
This article is general information, not tax, legal or accounting advice for your situation. For advice on your business, book a call with Lois.
