Essential Month-End Bookkeeping Checklist for Small Businesses

Keeping your books in order and having accurate financial information is crucial for making informed decisions in your small business. For this reason I created a month end checklist for you to walk through every month.  I then thought it would be a good idea to walk through this with you - so have created a video to accompany the checklist!

Download the checklist here and use it to walk through the video.

By following these steps, you can have confidence in your balance sheet and profit and loss statement, allowing you to make better financial decisions for your business.

You can also follow along this blog post for a more detailed explanation of the steps:

‍Understanding the Balance Sheet:

Before diving into the checklist, let's briefly explain the balance sheet. It consists of two sections: assets and liabilities + equity. Assets represent what your business owns, while liabilities + equity reflect what your business owes and the accumulated value. Maintaining an accurate balance sheet is crucial because any errors can impact your profit calculation and, ultimately, your tax obligations.

Step 1: Completing Prior Month's Transactions: Before starting the month-end closing process, it is essential to ensure that all transactions for the prior month have been entered into your accounting system. This includes sending out invoices for completed work or progress billings and entering bills or invoices from subcontractors or suppliers.

Step 2: Cash and Bank Account Reconciliation: The next step is to reconcile your cash and bank accounts. This process involves comparing your bank statement with your records in QuickBooks Online (or your chosen accounting software) to ensure that all transactions have been accurately recorded. Reconciling your bank accounts helps maintain the completeness and accuracy of your financial records.

Step 3: Accounts Receivable Review: Accounts receivable represents the amounts owed to your business by customers. Running an accounts receivable report allows you to review the outstanding balances and follow up on any overdue payments. It is crucial to stay on top of accounts receivable to maintain healthy cash flow.

Step 4: Inventory Evaluation: If your business deals with inventory, it is essential to count and evaluate your inventory regularly. Accurate inventory figures are crucial for determining your cost of sales and gross profit. By comparing your physical inventory count with the figures in QuickBooks, you can identify any discrepancies and make necessary adjustments.

Step 5: Investments and Other Asset Reviews: If you hold investments, it is important to review their value and consider recording any unrealized gains or losses. Additionally, you should review other assets, such as undeposited funds and fixed assets, to ensure their accuracy.

Step 6: Accounts Payable Assessment: Accounts payable represents the amounts your business owes to suppliers, subcontractors, or other creditors. Running an accounts payable aging report allows you to review outstanding bills and ensure their accuracy. It is crucial to verify that all amounts are valid and resolve any discrepancies.

Step 7: Credit Card Reconciliation: Similar to bank account reconciliation, it is important to reconcile your credit card statements to ensure all transactions have been accurately recorded and that there are no outstanding items.

Step 8: Sales Tax and Payroll Liabilities: If your business is subject to sales tax or has payroll liabilities, it is important to review and ensure that you are up to date with your filings and payments. Failure to meet these obligations can result in significant penalties.

Step 9: Other Liabilities Review: If you have other liabilities, such as lines of credit, term loans, or mortgages, it is crucial to reconcile them to ensure accurate recording of interest expenses and the correct representation of your financial obligations.

Step 10: Profit and Loss Statement: After completing the checklist, it is time to run your profit and loss statement.  Your profit number should now be accurate, and you can use it to make decisions!  If you would like to know more about the profit and loss statement, I also have a video here.  As you can see any inaccuracies in the balance sheet can impact your reported profit and tax obligations, so it is important to follow through the steps in the checklist before running your income statement!

By following this month-end bookkeeping checklist, you can maintain accurate financial records and gain valuable insights into your business's financial health. Regularly reviewing your balance sheet and profit and loss statement will enable you to make informed decisions and optimize your business's success and cash flow. Remember, accurate bookkeeping is the foundation for better financial management.

If you would like more information, and be able to ask specific questions I am considering running a workshop where we delve deeper into the steps. If this is of interest to you please reach out! If I have enough people interested I will schedule something, and it would be great to work with you in real time!

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Hi Kerry here from my Cloud Bookkeeping.

I work with I work with small businesses and entrepreneurs to help them keep their books in order and understand their numbers to be able to make better decisions in real time

the key to being able to make good decisions is having accurate information at your fingertips when you need it and for that purpose I created a checklist that you can work through every month in order to ensure everything is up to date and complete before you review your results

A lot of you have downloaded this checklist already, and I thought it might be helpful to walk through each of the steps so that you can understand exactly what needs to be done instead of just looking at the checklist and wondering what it all means!

I am going to be using the sample company in QuickBooks Online.  If you are new to my channel – welcome! I use QuickBooks online exclusively, if you're not using QuickBooks this is still a useful tool for you – keep watching!  If you're interested and would like to know which QuickBooks online plan would be the best for you there's a link below in the description below that leads to a page that describes all the different features.

Here is the checklist – if you don’t already have it you can download it below, and work along with the video.  Or grab it later!

Before we get started we want to be sure that we have entered all of the transactions for the prior month.

Have you sent out all of the invoices for any work you've completed or any progress billings that are due.   If you're not the type of business that needs to send invoices to customers, for example if you have a store where people pay at the time of purchase, or you have an ecommerce business you can obviously ignore this step.

Do you receive bills or invoices from subcontractors or suppliers?  If so, be sure you have entered them all too.

Now we are ready to go!

Let’s run a balance sheet in QuickBooks Online

Today, I am going to walk through the checklist, but before I do that,  I'm going to start with a little bit of an accounting explanation and just bear with me, it will be short, and it'll help everything make a lot more sense!  I also suggest you stay right to the end, so I can tie everything back together, and you can see why all of this is so important. 

OK let's have a look at our balance sheet what do you want to start with is just giving you a little bit of a quick explanation of what this balance sheet is there's a link I I hope this side there for the for a detailed explanation of the balance sheet so I'm not going to go through that now but just a little summary so if you're not interested just hit Fast forward or speed it up a little bit to to get to the next bit but if you're if you don't really understand just just bear with me for a minute So what we have when we're looking at a balance sheet and you can see here's one in the sample company is a top section which is assets these are the things that the business owns and then a bottom section that is the liabilities and the equity so liabilities are things we owe our credit card accounts payable maybe loans from the owner of the company and the equity is basically the part of the business that has built up to you mostly through profit we'll just keep it simple on the sets through profit now because the balance sheet has to balance if any of the numbers on your balance sheet are incorrect there's a very good chance your profit is also incorrect and This is why it's so important to look at your balance sheet understand and that's why I've devised this checklist so if you as we work through this I'll allude to this so you can kind of see the impact it would have on your profit and if you're going to work through this exercise might be a great idea just to make a note of what that profit number is before we get started because just think for a minute if the profit is wrong this is what you pay taxes on so if your profit is overstated you could be paying too much tax and I don't know anybody who wants to pay too much tax so now that I've kind of explained how that works let's have a look at number one step on our small business month in checklist

Now that we have our balance sheet, let's have a look at number 2.

 and that is to have a look at our cash and bank accounts now if you have um cash in a register petty cash tin count it see if the amount that you have in the tin agrees to what you have in QuickBooks next reconcile your bank accounts this is really important you grab your bank statement you compare it to QuickBooks we pop up here the gear icon reconcile and this is how we know that we have captured everything that has gone through the bank we want to be sure that our records are complete when we're looking at them at at any point in time but also we want to make sure we haven't double recorded things so there's a bank reconciliation video up here and then there's also a checklist to go through for before you do your bank reconciliation so this covers off that very first section in your balance sheet for cash and bank accounts 

back to me – it is very important to complete your reconciliations on a regular basis, and not just to reconcile to a zero difference – also to ensure there are no long outstanding amounts that haven’t cleared.  So check out my bank reconciliation video if you would like to look at this in more detail.

Next up is Accounts Receivable

so next we want to do what we want to do is we see a number here on the balance sheet for accounts receivable don't click through it that's owned that only works when we're looking at the profit and loss and you click through what I want you to do is run an accounts receivable report and I'll show you how to do that now so we'll pop across here to the left hand navigation bar and if yours looks like a bit of a disaster and not nice and clean like this there's also a video to show you how to change the navigation bar so go search that one out but it's going to be under customers sales leads something like that Oh no it's not we wanna pull cross to reports and in reports we select usually the account one accounts receivable summary so want to do is have a look down this list are do all of these people owe you money and in my experience most business owners have a pretty good handle on who owes them money and who doesn't if there are old amounts there cool people we we sometimes forget to actually pick up the phone but if someone's paying you not responding pick up the phone follow up get a payment plan in get the money and the longer you leave it the less likely you are to to collect that money and if there's something here that's if there's somebody that shouldn't be have a look at what's going on in your books why has the payment not been recorded was it perhaps recorded incorrectly did you double up your sales was it recorded to the wrong customer you need to investigate that

OK #4 inventory so if you don't have inventory you can hit Fast forward here if you do count your inventory now if you're a very large organization this might not be something you do on a monthly basis you you might leave it two year end ideally I'd recommend doing it a little earlier a little more regularly than that the reason being if you don't have accurate inventory then you don't have an accurate number to determine what your cost of sales are if you don't really know what the cost what it's cost you to sell things then you don't know what your gross profit is and you can't make good decisions so if you don't really know what the value of the inventory is and therefore what you cost of sales is and though the prices of things have increased you might not realize that you're not making as much money as you thought you were so look at those inventory numbers account your inventory and then if the number differs from what you've got in QuickBooks you can put through an adjustment

Number 5 on the checklist is investments – this may not apply to you – if it does, have a look at the value of any investments you hold, and you may want to record an unrealized gain or loss for any significant changes in the value of your holdings.

Undeposited funds and fixed assets

Number 6 -  is prepaid expenses.  We don’t have any in the sample company.  This is an account that is used when you pay for something in advance or when you pay for something that relates to a longer period.  For example when you pay your insurance for a year.  Let’s say you pay $24,000 for your annual insurance in December.  You don't want to have an expense of $24,000 showing up in that year, it's going to make it look as though your profit is a lot less than it should be. What you want to do is allocate $2000 in December and then you'll put the 22,000 remaining into prepaid expenses and each month you're going to be recording the expense that relates to that month.  If you have this situation it's a good idea to check that your prepaid expense balance is changing, and it's not just an amount that got posted by your accountant five years ago and is still sitting there.  This could mean that your expenses are too low – and your profit too high!  If that is the case, you could be paying too much tax.

OK so that's the asset section of the balance sheet covered off if you have any other items on your balance sheet and you're not sure what they might be you can reach out and also the comments below I try to be pretty quick getting back to people but I think that we've covered off most of the items you're going to normally see in the asset section of your balance sheet

Now let’s look at the liabilities  

Now we're going to pop down and have a look at the liability section similarly to accounts receivable accounts payable shows any outstanding bills any amounts you still owe so run the accounts payable aging summary and we're going to do that from the account section here so have a look through this list of bills are there any old amounts there do you really owe all of these is it possible some of these amounts have been double recorded for example when you paid the bill did you perhaps count the expense twice once again that's something that's going to reduce your profit so look through this make sure that these are all amounts that are outstanding and then yeah and then you'll be good

Next is credit cards similarly to the bank we want to reconcile our credit card statements these aren't usually on a month end date they've got a weird date so you if you're may 31st and your statement date was May 16th reconcile it to May 16th just make sure you're up to date the most recent statement and once again it's not just a case of reconciling to zero also make sure there are not items showing up on those statements that should have been cleared if that's the case it could be double recorded so check into that and complete credit card reconciliations

OK now sales tax is a little bit of a tricky one sometimes but you you can pop into this taxes section and have a look here to ensure that you're up to date with your sales tax filings and then file prepare and file and or and when we've completed the checklist you'll be in a in a good position to file any sales taxes due at the end of the month the quarter or the year

along also in the taxes section we have payroll liabilities make sure you where you keep right on top of these payments there are usually very high penalties for being late

then if you have any other liabilities such as a line of credit a term loan or a mortgage make sure that you're reconciling this if you've been making payments and recording the entire payment against the loan you might not be capturing interest expense it'll look like you owe less money than you really do and it'll also look like your profit is higher than it should be which is a case then of course of paying too much in tax

Now that we've walked right through our balance sheet we can be comfortable that everything is accurate and we can run a profit and loss statement now if you have a look at the profit at the bottom of your profit loss statement it's going to agree to the profit that you have showing up in your balance sheet so This is why it's so important to go through this checklist because that number right there your profit is impacted by all of these other amounts that we've just checked on

Hopefully that makes the checklist a little easier to follow, and you can make some great decisions to ensure the success of your business!

I've been thinking of conducting a workshop to walk through this in real life, so you can ask your particular questions, and delve into some of the items in more detail.  If this is of interest to you let me know!  If you are watching this video a long time after it was created, check the links – if I did a workshop there may be a link below! In case people do have questions so reach out if this is of interest to you and if I have done it I may have been able to get a recording so there might be something available for you and if so they'll probably be a link below.

I would love to hear if this was helpful, and if there are any assets or liabilities that I didn't include that you have questions about.  If there is something specific you would like to know more about reach out – I could make a video on that! 

Don't forget to like subscribe and I'll see you in the next video

Cheers