What Happens at Month End Close (and Why We Finish by the 10th)

What month end close means

Month end close is the point in the month when the books stop moving. Up to that day, transactions come in and get sorted. On close day, we check that every account agrees with the bank. We check that every cost has a home. We check that the numbers are final. Then we lock the month.

A closed month is a month you can trust. The profit and loss report for that month will not change. The balance sheet for that day will not shift. When you look back at the year, each month sits in its own clean row.

The close is not a single step. It is a short list of checks done in order. When each check passes, the month is closed. You can read more about how we keep this routine on our bookkeeping service page.

Why we finish by the 10th

We close the books by the 10th of the next month for a simple reason. A report from last month is only useful while you can still act on it. By the 10th, last month is still fresh in your head. You remember the big job. You remember the slow week. You remember the invoice that came in late.

If the close slips to the 20th, the month is already half gone. The numbers tell you what happened, but the chance to do anything about it has passed. A close on the 10th gives you most of the month to use what the books show.

Here is what the 10th gives you.

The month end close checklist

The close is the same short list every month. We do the same steps in the same order. That is what keeps it fast and what keeps it right.

Here is the checklist we run.

• **Pull every bank and card statement: ** checking, savings and every credit card.
• - **Match each account to its statement: ** no gaps, no extras.
• - **Sort the last transactions: ** give every cost a home.
• - **Check for missing bills: ** anything that came in but did not get entered.
• - **Reconcile every account: ** the books and the bank agree.
• - **Lock the month: ** the numbers are final.
• - **Send the reports: ** profit and loss, balance sheet and cash summary.

The same list every month means nothing gets missed. The same order means no step leans on one that has not happened yet. By the end of the list, the month is closed and the reports are on their way.

Start with the bank

The bank is where the close starts. The bank statement is the one record that does not depend on anyone entering it right. It shows every dollar in and every dollar out. We start there because it is the true list of what happened.

We pull the statement for the month we are closing. We pull it for every account the business uses. The checking account. The savings account. The credit card. Any other account that holds business money.

The statement gives us the starting balance, the ending balance and every line between. That frame is what we work inside. Every transaction in the books has to fit inside it. When the books and the bank agree at the end of the month, the account is reconciled.

Here is what we check on each statement.

Match every account

Each account gets its own match. The checking account matches to its own statement. The credit card matches to its card statement. We do not mix them.

A match means the books and the bank show the same number for that account at the end of the month. When they do, we know every dollar is accounted for. When they do not, we find the gap.

The gap is usually one of three things. A transaction in the bank but not the books. A transaction in the books but not the bank. Or a number entered wrong. We find each one and fix it. Then the account matches.

Here is what to look for.

• **A deposit in the bank but not the books: ** a sale that never got recorded.
• - **A payment in the bank but not the books: ** a cost that was missed.
• - **A number entered wrong: ** a transposed digit or a wrong amount.
• - **A fee the bank charged: ** small charges that sit unseen at the end of the statement.

Sort the last transactions

The bank shows what left your account, but it does not show what the cost was for. That is the next step. We look at each payment and give it a home.

A payment to the supply store is materials. A payment to the landlord is rent. A payment to the phone company is utilities. A payment to the fuel card is fuel. Each one goes to the right place so the profit and loss report tells the true story.

The last transactions are the ones that came in near the end of the month. A card charge that cleared on the last day. A bill that arrived on the 30th. A transfer that posted late. These are the ones that get missed when the close is rushed. We sort them before we lock the month.

Here is where last transactions hide.

• **Card charges that cleared on the last day: ** easy to miss in the rush.
• - **Bills that arrived on the 30th: ** still in email, not yet entered.
• - **Transfers that posted late: ** moved after the month turned.
• - **Recurring charges no one watched: ** software and loan payments that run on their own.

Send the reports

When every account is reconciled and every cost has a home, the month is closed. The last step is the reports. We send three.

The profit and loss report shows what you earned and what you spent. The balance sheet shows what you own and what you owe. The cash summary shows where the cash came in and where it went out. Together they tell the whole story of the month.

We send them by the 10th. That gives you most of the next month to read them and act. A report you read on the 10th is a tool. A report you read on the 25th is history.

A situation we clean up

The month that never closed

A busy business owner runs a strong month. Sales were up. The crew was full. The owner meant to look at the books but never did. The next month starts. The bank feeds keep pulling in new transactions. The old ones sit with no one sorting them. By the middle of the next month, the owner does not know what last month really earned. The profit and loss report is half done. The bank and the books do not agree.

Here is how we handle it. We pull the bank statement for the month that never closed. We match each account to its statement. We sort the transactions that were left behind. We find the bills that came in late and enter them. We reconcile every account. We lock the month. Then we send the reports. The owner can see what last month really looked like, and the books are ready for this month. We set up the close to run on the 10th going forward so the month never sits open that long again.

Mistakes we fix

• A month that was never reconciled
• Accounts that stopped matching the bank
• Costs that never got a home
• A balance that drifted because no month was closed
• Bills that came in late and sat in email
• A close that was started and never finished

Common questions

What does close mean? Close means the books and the bank agree for the month, every cost has a home, and the numbers are locked. After that, the report for the month does not change.

Why the 10th? A report from last month is useful while you can still act on it. By the 10th, last month is still fresh. You have most of the next month to use what the books show.

What if my books are months behind? We catch up one month at a time, from the oldest open month forward, and close each one before we move on. Then we set the close to run on the 10th going forward.

Do you need anything from me? We need the bank statements and any bills or receipts the bank does not show. The bank tells us what left your account. The bills tell us what the cost was for.