Key takeaways
- A monthly engagement should name the reconciliations, reports and open-item list it delivers, in writing.
- Each month the client sends the full statement for every account, not a transaction export.
- Payroll tax returns, sales tax filings and income tax returns are separate scope items unless the contract names them.
- The Form 1099-NEC threshold is $2,000 for 2026 payments, so collect a Form W-9 before the first payment.
- Judge a provider on the response time it will sign for and on whether the close package ties to the bank.
What a monthly engagement covers
A monthly bookkeeping engagement records and reconciles one month of transactions at a time. Each bank and credit card account is matched to its statement, each transaction gets an account and a category, and the month closes with reports the owner can read. Work outside that list, including payroll tax filings, sales tax returns and the annual income tax return, belongs on a separate scope line.
Read the scope for four named items: the number of bank, card and loan accounts, the payment processors (Stripe, Square, Shopify, PayPal or similar), whether accounts receivable and payable are included, and whether payroll journal entries are recorded. A proposal that says “comprehensive bookkeeping” with none of these listed does not define the work. Ask for the list in writing before the first month starts.
Payroll is the most common gap. Form 941, the quarterly federal payroll tax return, is due April 30 for the first quarter, July 31 for the second, October 31 for the third and January 31 for the fourth. Recording payroll journal entries is often part of monthly bookkeeping, but filing Form 941 usually is not. If the provider will prepare it, the engagement letter should say so and the fee should reflect the added work.
What arrives each month
A typical month produces the same package. Each reconciled bank and card balance ties to the closing balance on that account’s statement. The profit and loss and balance sheet are run after the reconciliation, not before. An open-items list names every transaction the bookkeeper could not code, with the date, the amount and the question to the client.
Worked example. A retail client has one checking account, one card and a Shopify payout account. The October checking statement lists 214 transactions, and the books hold 216 for the same account. Two extra entries explain the gap: a customer deposit recorded on the last business day of October that the bank posted in the first week of November, and a duplicate import from the bank feed. The reconciliation shows the deposit as in transit, and the next statement should show it. If it does not appear there, the item moves to the open-items list as a possible duplicate or a wrong entry.
A difference that is still open at the close date should not be pushed into an owner or suspense account to make the balances agree. Leave it on the open-items list with the client’s answer requested, and report the amount so the owner can see it.
What the client has to send each month
Ask for the full-month statement for every account, downloaded from the bank or card portal as a PDF, not a transaction export. The statement shows the opening and closing balance, which is what the reconciliation ties to. Include accounts with no activity, because a missing account is the usual reason a reconciliation never closes.
Processor data is a separate request. Payment processors usually pay out net of fees and refunds, so a bank deposit is not the same as a sale. Ask for the processor’s monthly payout report or balance summary, which shows gross sales, fees, refunds and payouts. Without it, the bookkeeper records the deposit as income and the fees disappear into the books.
Collect a Form W-9 from each contractor before the first payment. The IRS says Form W-9 is used to provide your correct Taxpayer Identification Number to the person requesting it. The rule requires backup withholding at a flat 24% rate when the payee does not give a TIN in the required manner, or when the IRS notifies the payer that the TIN is incorrect. A missing W-9 is therefore a payment problem as well as a filing problem.
For payments made in 2026, the Form 1099-NEC reporting threshold is $2,000 per payee. For payments made before 2026 it was $600. The 2026 forms are due January 31, 2027. That date is a Sunday, and the IRS rule moves a weekend due date to the next business day, so the practical deadline is Monday, February 1, 2027. A bookkeeper who tags vendor payments each month makes the year-end 1099 step a matter of reading the tags, not rebuilding the year.
Document handling to put in writing
Set one place for documents and one naming pattern. A workable pattern is YYYY-MM_Institution_Account-last4_Statement.pdf, so 2026-10_Chase_Checking-4821_Statement.pdf sorts by month and identifies the account. Request files through a secure portal or the firm’s upload link, not by email. Email puts bank details and tax IDs into inboxes that nobody manages.
Retention is set by the IRS guidance. For most records the IRS says to keep them for 3 years, and for employment tax records it says to keep them for at least 4 years after the date the tax becomes due or is paid, whichever is later. Ask the provider where the monthly statements and reconciliations are kept, how long they stay there, and how you get a copy when the engagement ends.
Password-protected statement PDFs are a common failure. The bookkeeper cannot open the file, so the month waits for a phone call. The fix is to ask the bank for a download that opens without a password, or to send the password in a separate message through the portal. Do not put the password in the same email as the file.
Judging responsiveness before you sign
Responsiveness is a set of terms you can test, not an impression from the sales call. Ask the provider five questions and write the answers into the engagement letter. Pick a number you can hold the firm to, such as 2 business days for a reply to an open item, and put it in the letter as: “Replies to open items within 2 business days.” How many business days after month end is the package delivered? How many business days does a reply to an open item take? Who answers when the assigned bookkeeper is out? How are open items tracked, and how old is the oldest one in a normal month? Can you send a redacted close package from a client with a card account and a payment processor?
Decision rule. If the provider will not name a response time, do not sign. If it names one but will not put it in the letter, record the response time as unknown and check the first two months against what was promised.
A usable sample package has four parts: a reconciliation for each account showing the statement balance and the book balance, an open-items list with the age of each item, the profit and loss and balance sheet for the month, and a short note on anything that changed from the prior month. A package with only a profit and loss report has skipped the reconciliation.
Failure modes and fixes
Uncategorized transactions collect in a suspense account or a “ask my accountant” bucket. Set a rule that anything not coded by the close date goes on the open-items list with the client’s question. Report the suspense balance each month, and require a call to the client when the count of open items passes a limit agreed in advance, such as 10 items.
Personal charges are coded as business expenses. Personal charges on the business card are common, and they change both the profit figure and the owner’s draw. The onboarding should list every personal account the owner uses, and the monthly request should ask the client to mark personal items in the statement.
A reconciliation that never ties usually has one of three causes: a missing account, a duplicate bank feed, or a statement from the wrong period. Before reconciling, check that the statement’s opening balance equals last month’s closing balance. If it does not, a statement is missing or the wrong period was uploaded, and the reconciliation should stop until that is fixed.