How to Process Your Month-End Close in QuickBooks Online (Step-by-Step Guide)

Reviewing the books each month is one of the most important habits for maintaining accurate, reliable financial information in your business. Even though QuickBooks Online automates a large part of your bookkeeping, there are still key steps to follow before you run reports, file sales tax, or make decisions based on your numbers.

https://www.youtube.com/watch?v=0yG8LR-ymCg

In this guide (and in the video above) I’ll walk you through the complete month-end process in QuickBooks Online, using the newest interface and built-in AI features. You’ll learn exactly what to check, why it matters, and how to avoid some of the most common errors that lead to inaccurate financial reports.

And if you prefer a simple checklist, you can download one at the bottom of this post to make your month-end close faster and more consistent each time.

Why “Closing the Books” Still Matters in QuickBooks Online

The phrase closing the books comes from more traditional, manual accounting systems, where accountants had to journal profit into retained earnings at the end of each period. Larger organizations still talk about their month-end “close date,” when transaction entry stops and financial reports are finalized for management.

In a small business using QuickBooks Online, your bookkeeping happens continuously as bank and credit card feeds import transactions in real time. But even though you’re not making dated journal entries to close the month, you still need to review specific areas before filing taxes or relying on your numbers.

A proper month-end close helps you:

• Confirm accuracy in Accounts Receivable and Accounts Payable
• Ensure bank, credit card, and clearing accounts match reality
• Catch missing entries before they compound into bigger errors
• Fix sales tax issues before filing
• Identify inventory discrepancies
• Protect prior periods from accidental changes

Start Your Month-End Close with Accounts Receivable

The first place I recommend starting each month is with your Accounts Receivable report. QuickBooks’ newer AI tools surface some of this information immediately on your dashboard, including overdue invoices you can review and follow up on.

Your goal here is to make sure nothing is aging unnecessarily. The older a receivable becomes, the less likely it is that you’ll collect it so this step directly affects your cash flow. If an invoice is overdue, send a reminder or follow up with the customer. If something appears outstanding that you know was paid, check the bank feed to ensure the payment was properly matched.

A clean Accounts Receivable aging summary is one of the strongest indicators of healthy bookkeeping.

Review Accounts Payable for Accuracy

Next, look at your Accounts Payable aging summary. Scroll to the “What You Owe” section in your reports and confirm that no bill appears unpaid if you know it has already been taken care of.

Common issues here include:

• A payment recorded but not matched to the bill
• Duplicate entries
• Missing expenses still sitting unreconciled in the bank feed
  

This review ensures that expenses are neither understated nor overstated and that vendors aren’t accidentally paid late.

Check Cash Accounts and Clearing Accounts

While traditional petty cash is rare today, if your business handles cash or keeps a register balance, verify that the amount recorded matches what’s physically on hand. This includes any cash not yet deposited, checks held in a drawer, or credit card payments still waiting to clear.

In this same category, pay close attention to clearing accounts such as:

• Undeposited Funds
• Shopify Clearing
• PayPal Clearing
  

These accounts should clear in and out regularly. If the balance grows continuously or never reaches zero, it’s a sign that payments may be duplicated, missing, or mis-posted. Undeposited Funds in particular can cause incorrect sales tax reporting and misstated revenue if not reviewed monthly.

Reconcile Every Bank and Credit Card Account

Reconciliation is the backbone of accurate bookkeeping. Before starting, visit your bank feed and ensure all transactions up to the statement date have been categorized or matched.

Once the feed is clear, use any of the reconciliation paths in QuickBooks (there are several now!) and compare your statement ending balance to the balance in QBO. If everything matches, greatm just double-check that nothing remains unchecked in the reconciliation window. Unmatched items often signal an issue.

If you have business loans, review those balances as well. If your loan payments are pulled directly from the bank feed and categorized as “Loan Payable,” you may be mixing principal and interest. This results in understated loan balances and missing interest expense. It’s worth verifying this monthly or quarterly at minimum.

Review Sales Tax Before Filing

Before filing any sales tax report, compare your gross sales from the Sales Tax Center with your Profit and Loss statement to ensure they match. Then compare the amount due to the sales tax liability balance on your Balance Sheet.

This cross-check is one of the most reliable ways to identify errors early before they turn into filing issues.

If You Have Inventory, Verify Quantities and Value

Inventory can have a significant impact on your Profit and Loss statement, so accuracy here is crucial. Run an inventory valuation report and compare quantities in QuickBooks to the actual items on hand. Look out for:

• Missing items
• Obsolete products still recorded at full value
• Incorrect or outdated costs
  

Even if you don’t count inventory monthly, periodic checks ensure your records reflect reality.

Analyze Your Profit and Loss

Once all the above steps are complete, run your Profit and Loss (ideally by month) to compare results over time and identify anything that looks unusual.

Unexpected spikes, empty categories, or inconsistencies often point to categorization errors or missing transactions. This is the point where your hard work pays off: clean, accurate data results in meaningful financial insights.

Confirm Your Balance Sheet

Your Balance Sheet should now reflect clean, updated balances. Ensure:

• Bank and credit card accounts match reconciled balances
• Accounts receivable and payable look correct
• Inventory and clearing accounts make sense
• Loan balances match statements
• Sales tax liability is ready for filing
  

A clean Balance Sheet is one of the best indicators that your month-end close was done correctly.

Protect Your Work: Set a Closing Date

Once you’ve confirmed your numbers, you can prevent accidental changes by setting a closing date in QuickBooks Online. Go to Settings → Account and Settings → Advanced → Close the Books.

You can choose to allow changes only with a warning or require a password. For most small business owners, the warning is ideal as it protects your data without risking a forgotten password that locks you out.

This step ensures that after you’ve filed sales tax, issued reports, or finalized the month, nothing gets altered in a prior period.

Closing the books each month doesn’t need to be complicated or time-consuming. When you follow the same steps consistently, and take advantage of the new QuickBooks AI tools, you’ll have clean numbers, accurate reports, and far fewer surprises at tax time.

Don’t forget to download the month-end checklist below to keep your process organized and efficient: https://learn.mycloudbookkeeping.org/small-business-month-end-checklist

Compare Quickbooks Plans: https://www.mycloudbookkeeping.org/quickbooks-plan-comparison

Book a consultation: https://www.mycloudbookkeeping.org/consultation

Hi, Kerry here from My Cloud Bookkeeping. I work with small businesses and entrepreneurs to help them manage their business finances using QuickBooks Online in real time. And sometimes I am asked how to close the books each month. This is an expression that often dates back to the old days of more manual accounting when it was necessary to do a journal entry at the end of a period in order to clear profit to retained earnings. Or if you’ve worked in a larger organization, they often talk about their close date each month as being that cutoff for recording transactions prior to running reports for management.

Typically, in a small business where you have your bank and credit cards connected, you’re entering things in real time and are less likely to need lead time before producing your reports. That said, there are still steps that need to be followed prior to filing any sort of tax report, including your sales tax, payroll, or looking at your results to ensure that what you’re looking at is accurate. I have a checklist down below you can grab to check off these items. And also stay through to the end, and I’ll show you how you can prevent accidentally posting to a period after you’ve filed your taxes and looked at your reports.

Here we are in our sample company. The very first thing that I like to do at month end is take a look at an accounts receivable report, which previously was something that I used to go run from the Reports section. However, with the new AI that’s showing up in QuickBooks—remember anytime we see this little circle, it’s the AI—we now have this information presented right in front of us when we open QuickBooks. Here we have overdue invoices. I’m going to click through here and it’ll give us the opportunity to review them.

We have the first one, Polson Medical Supplies. It’s giving us a list. It’s showing how we can send a reminder, which is kind of cool, but I wanted to look at a list first. So, I guess we could just hit Send a Reminder. And let’s see if it takes us to the next one. Okay, well this is really interesting and not quite where I was expecting to go with this, so I’m going to pop out and grab a report, which is where I’d normally go.

As you can see, the accounts receivable summary report is right here. You’ll also see the accounts receivable aging summary and aging detail. I typically run straight toward the aging summary because it gives me a screenshot of what’s going on. The first thing I want to see is: is there anything old? Because once something is getting old, you’re less likely to collect it, and that needs to be a priority for following up—for cash flow. In this sample company, everything looks well managed. There’s not much that’s old and most of it is current. We could go back and start sending reminders, but this is always the first place I start.

The next place I go is accounts payable. I typically start by typing in the search bar, but you can scroll to the “What You Owe” section on the Reports page. I click into the accounts payable aging summary and check if there are unpaid amounts that shouldn’t be there. If something shows outstanding but you know you’ve paid it, that’s a sign to check your bank feed or confirm if something wasn’t recorded correctly.

The next area I like to look at is cash balances—something a lot less common today, but still relevant. If you have petty cash or a cash register, you want to check that the balance showing in QuickBooks matches what you actually have on hand. You’d also check undeposited funds. If you have amounts you’ve received but haven’t deposited, this could be cash, checks, or credit card payments not yet matched. Undeposited funds should clear regularly. If the balance is ever-increasing, you have a problem. Your results will be wrong, your sales taxes will be wrong—it can create an accounting disaster. The same applies if you use Shopify or PayPal clearing accounts.

The next thing we want to do is reconcile our bank and credit cards. Before reconciling, I check bank transactions and ensure everything up to the reconciliation date has been posted. You want to make sure the bank feed is clear. This applies to both bank accounts and credit cards. Once everything is posted, go to Reconcile—there are several ways to get there—and compare your statement ending balance to what’s in QuickBooks. If everything matches, wonderful. Before hitting Reconcile Now, scroll and make sure nothing is left unchecked. If there is, investigate it.

While we’re talking about bank balances, it’s also a good idea to look at any loans. If loan payments are being categorized entirely as loan payable, you may be mixing interest and principal. That means your loan balance will look too low, and you’re not capturing interest expense. It’s a good idea—if not monthly, then quarterly—to check your loan balance against your loan statement so your profit number is correct and so you know how much you still owe.

Next, I go into the Taxes section. Before filing any sales tax reports, I look at gross sales and compare that to my Profit and Loss statement. Then I look at the amount due and compare that to the balance sheet. This is a very good way to ensure what QuickBooks has pulled into sales tax is the same as what’s in your reports and to catch any mistakes.

If you have inventory, it’s important to count it regularly and ensure it matches your records. You might run an inventory valuation summary and compare quantities to what you physically have. If older items are no longer worth what you paid for them, your inventory could be overstated.

After we’ve checked all of these things, then we go look at our actual Profit and Loss. I like to run a Profit and Loss by month to see trends and to make sure nothing jumps out as strange. Unexpected numbers often point to incorrect categorization. If you’ve watched any of my videos before, you know I always like to have something to compare to. Once I’ve reviewed it by month, I return to a standard Profit and Loss so I can verify that the profit number matches what shows on the balance sheet.

Then we run the balance sheet. Ideally, by following through the checklist, we’ve reconciled bank accounts, checked accounts receivable, counted inventory, reviewed undeposited funds, checked loan balances, reviewed accounts payable, verified sales taxes, and confirmed our net income. When looking at your balance sheet at month end, make sure there’s nothing on it that you aren’t aware of or haven’t checked. That’s how you know everything is accurate and ready for tax filing or reporting.

At the beginning of the video, I promised to show you how to set a closing date. Go to the gear icon, Account and Settings, then Advanced. Scroll to Close the Books. You can select the date you want to close. I always do this at year end once my income taxes are filed. But you can also do this monthly if you want to ensure that no changes are made after you’ve filed sales taxes or issued reports. You have the option to allow changes after viewing a warning, or to require a password. I always choose the warning because if you forget the password, nobody will be able to get into the books.

Once the closing date is set, try entering a transaction dated before the closing date. QuickBooks will warn you that you’re entering something into a closed period. You can adjust the date as needed to keep your reports accurate.

Does that give you a better idea of what to do each month and how you can close the books if you want to ensure no changes are made after you’ve filed your taxes or run your reports? Is there anything else you’d like to know? Did I miss anything? Let me know below. Be sure to download the checklist, like, subscribe, and I’ll see you next time. Cheers.

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