Key takeaways
- Set the close calendar before the month starts, with a client due date and an internal close date.
- Ask for the same records in the same order every month.
- Reconcile every bank, card and loan account before recording adjustments.
- Send the owner a short report with the numbers and the open questions, not a 40-page packet.
Set the close calendar
Pick two dates for every month: the date the client's records are due and the date the books will be closed. Work backward from the owner's deadline, such as a management report or a loan covenant, and leave room for one round of questions.
The client due date should be realistic. If the bank statement arrives on the 5th, a due date on the 3rd guarantees a late close. Most small clients can send the prior month's statements by the 5th to the 10th.
Put both dates on the client's checklist and on the firm's calendar. The same dates should appear every month, so the client learns the rhythm and the firm can plan capacity.
Collect the statements and records
Send the monthly checklist on the same day every month. The list should ask for the bank and card statements, the payroll register, the sales reports behind the deposits, the loan statements and the receipts above the firm's threshold.
The statement is the anchor. A transaction export can fill in detail, but it does not show the opening and closing balances the firm reconciles against. Ask for the statement the bank produces for the full month.
When a record is missing, mark it as missing instead of guessing. A close with two open questions is more reliable than a close with two invented numbers.
Reconcile every account
Reconcile the bank accounts first, then the credit cards, then the loans. Each reconciliation should explain the difference between the bank balance and the book balance, not just make the difference disappear.
A recurring difference is a process problem. A check that never clears, a duplicate payment or a bank fee the client did not record should be documented and fixed, not plugged into an adjustment every month.
Do not move to the next account until the current one is explained. A reconciliation that is forced will hide the next month's problem.
Record the adjustments
Record the items the bank feed does not explain: the missing receipt, the owner's personal purchase, the payroll accrual, the prepaid insurance, the loan interest and the depreciation for the month.
Keep a list of the adjustments with the reason, the amount and the support. The list is the audit trail for the close and the first place to look when a number changes.
If an adjustment needs a decision from the client, ask before the close date. Do not close the month with an unresolved question and hope the next month is cleaner.
Review the statements
Review the profit and loss against the prior month and the same month last year. A large swing in a line is either a real change or a recording error, and the review should say which.
Review the balance sheet for negative cash, a negative accounts payable, a loan balance that does not match the statement, or an equity account that moved without an explanation.
The review is not a second close. It is a short pass that catches the errors before the owner sees them.
Send the owner a short report
The owner needs the profit and loss, the balance sheet, the cash balance and a short list of what changed. A 40-page packet that nobody reads is not a report.
Include the questions that affect the numbers, such as a large unexplained deposit or a receipt the client still owes. The owner can answer them before the next close.
Keep the report consistent from month to month. The owner learns where to look, and the firm spends less time explaining the format.
Close the period and carry forward
Lock the period after the review, so a later entry does not change a report the owner already received. If a correction is needed, make it in the current period with a note.
Carry forward the open items: the missing receipt, the uncleared check, the loan statement the client still owes. The next close starts with the list, not from memory.
A close that ends with a short open-items list is a close that can be repeated. A close that ends with a pile of unresolved questions will be repeated as a cleanup.