Closing your books every month means making sure everything that happened in the month is recorded and correct. It takes an hour or two when you do it monthly, and days when you leave it for the end of the year.
The 8-step monthly close
- Record all income: invoices, sales from apps and platforms, and cash deposits.
- Record all expenses and attach receipts for the important ones.
- Categorize every transaction: nothing left in "uncategorized".
- Reconcile every bank and credit card account to the statement balance.
- Review who owes you (accounts receivable) and follow up on late invoices.
- Review what you owe (bills, loans, sales tax, payroll taxes).
- Record loan payments correctly, splitting principal and interest.
- Review your profit and loss and balance sheet and compare them with last month.
Three numbers to look at every month
- Revenue: is it growing, flat or dropping?
- Profit margin: how much of every dollar of sales you keep.
- Cash: how many months of expenses you could cover.
Set aside money for taxes
Use your monthly profit to calculate how much to set aside for taxes. Our free "how much to set aside" calculator can help you find the percentage.
With monthly bookkeeping, we do the close for you and send your reports every month.
This article is general information, not individual tax or legal advice. Rules and fees change; confirm current requirements with the official source or contact us about your situation.