Month-end close for a small firm: a simple checklist
Big companies have a “month-end close”: a set routine where the finance team checks that everything for the month is recorded, matches the bank, and makes sense before anyone looks at the reports. Small firms usually skip it. Then, a few months later, the numbers stop making sense and nobody remembers why.
You don't need a finance team to close your books. If you run a consulting practice, an agency, or another firm that bills other businesses, an hour or less a month is usually enough. Here's a routine that works, in the order that makes it fastest. (This is general information, not tax advice. Your CPA can tell you what your business needs.)
Pick a day and protect it
Choose a fixed day, such as the fifth business day of the month. That gives your bank and card statements time to post, and gives clients a few days to pay invoices that were due on the first. Put it on your calendar as a recurring meeting with yourself. The routine only works if it happens every month, and it's much shorter when it does.
Step 1: Make sure every transaction is in
Start with what came through your bank and card accounts last month. Every deposit and every charge should be recorded and in the right category. Go through anything still waiting for review, and fix any category that looks wrong. Our guide to categorizing business expenses covers the tricky ones, like meals, software and owner draws.
Two things to look for while you're there:
- Personal spending on the business card. Record it as an owner draw, not an expense, and try not to repeat it. See separating personal and business money.
- Client payments that came in without an invoice match. A deposit should be applied to the invoice it pays, so the client's balance goes down. A payment left sitting as plain income makes the client look like they still owe you.
Step 2: Reconcile every bank and card account
Reconciling means checking that your books and your bank agree on the ending balance for the month. It's the single best check you have, because the bank is an outside record you didn't type. If they don't match, something is missing, doubled, or in the wrong month. Do it for every checking, savings and credit card account, not just the main one. Here's how to reconcile in about 15 minutes.
Step 3: Go through your receivables
For a firm that bills other businesses, this is often the step that matters most. Your profit and loss can look great while your cash runs thin because clients on net-30 terms are paying on day 60.
- Check the aging. Look at what's owed to you, grouped by how late it is. Anything over 30 days past due deserves a personal note, not just another automatic reminder.
- Send statements. A statement lists every open invoice for a client on one page. Accounts payable teams often pay from statements, and one now and then catches invoices that got lost in someone's inbox.
- Clean up small balances. If a client short-paid by a few dollars, or you agreed to a discount after the fact, record a credit or write-off so the balance is real. Old pennies make aging reports hard to trust.
- Make sure everything you did got billed. Before you close the month, check that every retainer, milestone and month of hours is invoiced. Unbilled work is the easiest money to lose.
For more on shortening the wait, see how to get paid faster with invoices and reminders.
Step 4: Handle bills and anything outside the bank
Some things don't show up as a bank line on their own. Check for:
- Bills you received but haven't paid yet, if you keep books on the accrual basis. (Not sure which basis you use? Read cash vs. accrual accounting.)
- Contractor payments, with a tax ID and address on file for each contractor, so 1099s aren't a January scramble.
- Money that moved between your companies, if you own more than one. Record it on both sides. Our guide to keeping books for more than one LLC walks through it.
- Anything your CPA asked you to record, such as a loan payment split between principal and interest.
Step 5: Read your numbers
Now that the month is complete, the reports mean something. Spend ten minutes on three questions:
- Profit and loss: Did you make money last month? Is any expense category much higher than usual, and do you know why?
- Cash: How much is in the bank compared with a month ago, and how much is still owed to you?
- Clients: Is too much of your revenue coming from one client? For a small firm, losing a client that brings in half your revenue is a bigger risk than most expenses.
Write down one or two sentences about what you saw. Over a year, those notes become the story of your business, and your CPA will thank you for them.
Step 6: Don't change last month after you close it
Once a month is reconciled and reviewed, leave it alone. If you find a mistake later, fix it with a correcting entry in the current month instead of editing the old one, and leave a note. That way the reports you already looked at, and anything you sent to a lender or your CPA, still match.
The checklist
- Same day every month, on the calendar.
- Every bank and card transaction reviewed and categorized.
- Client payments matched to the invoices they pay.
- Every bank and card account reconciled.
- Aging reviewed; personal follow-up on anything over 30 days past due.
- Statements sent to clients with open balances.
- All work for the month invoiced.
- Bills, contractor details and intercompany activity recorded.
- Profit and loss, cash and client mix reviewed, with a short note.
- Closed months left alone; fixes go in the current month.
How Apsis helps
Apsis is built for this routine. Bank and card transactions come in through your bank connection with suggested categories you approve. Reconcile tells you in plain words which side is higher and why, and counts down to zero when the bank and your books agree. Receivables shows aging on its overview, and you can print or email customer statements with your logo. Invoices carry your payment terms and can send up to four automatic reminders that stop when the invoice is paid. Recurring invoices go out on schedule, and you can add a charge, give a credit, or write off a balance from one place. Posted entries are never deleted: a change reverses the old entry and posts a new one, so past reports still match.
Your CPA gets a free accountant seat to review the month with you. Apsis is $19/month for your first company with three users, after a 30-day free trial. It doesn't run payroll, so if you have employees, keep your payroll service and record payroll in your books. Try Apsis free for 30 days.