The month-end close checklist we use for every client

Most small-business books are only truly correct once a year, when the accountant prepares the year-end. For the other eleven months the owner is working from numbers that are incomplete, unreconciled or both. A monthly close fixes that.

This is the checklist our CPA partner uses for every bookkeeping client. It is written for owner-managed businesses using cloud accounting software, but the steps apply to any ledger. Use it as a standard for your own bookkeeper, or as a way to judge whether your books are being closed properly.

What a month-end close is

Month-end close

A month-end close is the set of procedures that completes, checks and locks the accounting records for a month, so the financial statements for that month are accurate and will not change afterward.

Closing is different from bookkeeping. Bookkeeping records transactions as they happen. The close asks a harder question: is everything that belongs in this month actually here, and is everything here correct?

How long a close takes depends on transaction volume, the number of accounts, and how clean the books were going in. The first few closes on a neglected ledger take longest, because they surface old errors. Once the accounts are reconciled and the routine is set, each month mostly confirms that nothing new has gone wrong.

A proper close gives you three things. First, monthly statements you can make decisions on. Second, problems caught while they are small, such as a missed bill or a customer payment applied to the wrong invoice. Third, a much simpler year-end, because the accountant starts from reconciled books instead of rebuilding them.

Ground rules before you start

• Set a close date. Pick a working day each month by which the close is finished, and hold to it.
• Name one owner. One person is responsible for completing the checklist, even if others contribute.
• Separate preparer and reviewer. Whoever does the close should not be the only person who checks it.
• Keep a standard order. The steps build on each other. Skipping ahead creates rework.
• Lock the period. Once reviewed, lock the month in your software so no one changes it by accident.
• Write things down. Every reconciliation and adjustment gets a short note and supporting document.

The checklist, step by step

1. Collect documents and set the cut-offGather bank and credit-card statements, supplier bills, sales records and payroll reports for the month. Anything dated after month-end belongs to next month.
2. Record all sales and billingsMake sure every invoice for work done or goods delivered in the month is issued and recorded, including progress billings.
3. Record all bills and expensesEnter every supplier bill and expense receipt for the month. Chase missing bills for recurring costs such as rent, utilities and software.
4. Reconcile bank and credit-card accountsMatch every account to its statement, line by line. Investigate anything unexplained rather than forcing the balance.
5. Reconcile receivablesAgree the accounts receivable aging to the general ledger. Apply payments correctly and flag slow or doubtful accounts.
6. Reconcile payablesAgree the accounts payable aging to the ledger and compare key supplier balances to their statements.
7. Reconcile payroll and remittancesAgree wages, source deductions and employer contributions to payroll reports, and confirm CPP, EI and income tax remittances were made on time.
8. Reconcile HSTCheck that HST collected and input tax credits in the ledger agree to the filing, and that the liability matches what is owed.
9. Post accruals and prepaid adjustmentsRecord expenses incurred but not yet billed, revenue earned but not yet invoiced, and the monthly portion of prepaid costs such as insurance.
10. Update fixed assets, loans and shareholder accountsRecord asset purchases and amortization, split loan payments into principal and interest, and reconcile the shareholder loan.
11. Review the statementsCompare the income statement and balance sheet to last month and to budget. Explain every material change before moving on.
12. Lock the period and issue the close packageOnce reviewed, lock the month and send the package to the owner with a short written summary.

The review step is where most of the value sits. A close that reconciles but never asks “does this make sense?” misses the errors that matter.

The same checklist, grouped by area

Some teams find it easier to work through the close by account area. These are the checks behind each step above.

Cash

• Every bank, credit-card and payment-processor account reconciled to its statement
• Outstanding cheques and deposits in transit listed and aged
• Transfers between accounts recorded on both sides
• Merchant fees and payout timing from card processors recorded separately from sales

Revenue and receivables

• All work completed in the month invoiced, or accrued if invoicing is delayed
• Deposits and customer prepayments held as liabilities until earned
• Receivable aging agrees to the ledger; doubtful accounts reviewed
• Credit notes and write-offs approved and documented

Expenses and payables

• Recurring bills present for the month
• Payable aging agrees to the ledger; supplier statements checked for missing bills
• Capital purchases separated from repairs and supplies
• Personal or shareholder expenses identified and coded correctly

Payroll and taxes

• Gross wages, deductions and net pay agree to payroll reports
• Source deduction liability agrees to the remittance made
• HST collected, input tax credits and the HST payable account reconciled
• Any CRA notices or instalment requirements logged

Balance sheet and adjustments

• Prepaid expenses and accrued liabilities supported by a schedule
• Fixed asset register updated; amortization posted
• Loan balances agree to lender statements
• Shareholder loan continuity schedule updated
• Inventory adjusted to count or perpetual records, where applicable

What goes in the close package

The close package is what the owner, and eventually the year-end accountant, receives. It should be short enough to read and complete enough to rely on.

Which KPIs belong in the package depends on the business. Our guide to KPIs for owner-operated businesses covers the ones we see most often.

Where closes usually go wrong

• Reconciling only the bank. The bank can balance while receivables, HST and the shareholder loan are wrong.
• Forcing differences. Posting a small unexplained difference to a suspense or miscellaneous account hides errors that grow.
• No accruals. Without accruals, a month with a large bill looks terrible and the next looks excellent. Neither is true. See cash vs accrual accounting for why this matters.
• Never locking the period. If last month can still change, last month's report cannot be trusted.
• Skipping the review. A second look at the statements catches most coding and cut-off errors.
• Closing too late. A close that finishes weeks after month-end is history, not management information.

How the close feeds everything else

A reliable close is the base for every other piece of financial work. Forecasts start from closed actuals. Lender covenant reports depend on them. Year-end statements take less time, and corporate tax planning can happen during the year rather than after it.

This checklist is the standard behind our bookkeeping services. Books closed this way are books our CPA partner can work from at year-end without redoing them. If you want a second opinion on how your month-end is being handled, you can request a consultation.

Questions

This guide is general information for Ontario businesses, not advice for your situation. Rules change; talk to us before acting on it.