Month-end Close Checklist For Small Business Owners 

Understanding the nuances of accounting and finances as a small business owner can be daunting if you don’t know where to start. Get yourself ahead of your financial constraints with a month-end close checklist made specifically for small business owners!
Small business owners sitting down to do their finances

Picture this: You’re not stressed during tax time, you know exactly why and where every single penny of your business goes, and you’re on the way to your financial success.

Now let me break that thought with this: it’s possible.

Over 80% of the business landscape is populated by small businesses that often lack the financial literacy to scale. But if you’re looking to grow your small business, it’s time you bring out a month-end close checklist and sit down to evaluate your financial situation.

From setting up a tax savings account to account reconciliation, let’s start with why you even need a checklist.

Why should I make a month-end close checklist for my small business?

According to OnPay, around 50% of small business owners handle finances and accounting themselves. And 70% of small businesses take care of their finances and financial reporting in-house!

But I’m here to tell you why your accounting system benefits from having a month-end closing checklist, especially if you’re your own accounting team.

Reveals how business is performing

A month-end close checklist serves as a structured guide to ensure that all financial transactions are properly recorded and accounted for.

By diligently following the checklist, you gain a comprehensive view of your business’s financial performance for the month. This information is invaluable for assessing the health of your business, identifying trends, and understanding which aspects of your operations are contributing to your bottom line.

Armed with this insight, you can make informed decisions about resource allocation, expansion opportunities, and areas that may require improvement.

Improves efficiency

A month-end close can be a complex process involving multiple financial tasks, from reconciling bank statements and verifying expenses to preparing financial statements and ensuring compliance with regulations.

A checklist helps streamline these tasks by breaking them down into actionable steps. This reduces the chances of you making an error because you’re pressed for time!

Tracks money management

One of the essential aspects of financial management is tracking where your money is coming from and where it’s going. A comprehensive month-end close checklist includes tasks that involve reconciling accounts, categorizing expenses, and reviewing revenue streams.

This meticulous tracking not only ensures the accuracy of your financial records but also enhances your ability to manage cash flow effectively.

With accurate and up-to-date financial data at your disposal, you can make informed decisions about investments, cost-cutting measures, and business growth strategies that align with your financial goals.

9 elements of a monthly bookkeeping checklist

Bookkeeping and being financially aware of yourself can help you stay ahead of the game by a mile. Now that you’re ready to tackle a month-end close checklist, here are 8 things that should be on your checklist!

Set a time for your financial close

Knowing when you’re coming to the end of an accounting period can make the closing process smoother in more ways than one.

You don’t risk forgetting your closing date or being unorganized when the day actually comes along. So make sure to mark your calendar with the right month-end date and meet your deadlines!

girl writing on calendar
from Pexels

Set aside your estimated tax liability

Taxes are a worrying aspect of a blooming business, but a month-end financial checklist can ease some of those worries away.

I recommend saving 15-25% of your profits in a tax savings account, so you can embrace tax season without a worry on your mind. But that’s not set in stone and doesn’t have to be true for every case out there, so save as much as realistically logical!

As a result, you’re better equipped to meet your tax responsibilities on time, avoiding penalties and ensuring the smooth financial operation of your business.

Hot tip: Look into tax write-offs that you can deduct from your total payables at the year-end, and keep a clear record of them every month!

Download your bank statements

Staying updated with your bank statements every month is perhaps the best way to close the books. You can easily download your bank statements from your banking app or with a quick visit to your bank!

But why should you?

Bank statements are an external source of truth that helps you to cross-examine your recorded transactions. It also lets you check if you have any deductible business expenses charged from your personal bank accounts!

Create a profit and loss statement

Profit and loss statements are one of the most beginner-friendly and crucial financial reports that can reveal a lot about your accounting and finance prowess. Including it in your month-end close checklist is essential to know your financial health!

A P&L statement provides a comprehensive overview of your business’s financial performance over a specific period, typically the previous month. It helps you assess whether your business is generating a profit or incurring a loss!

It also shows you where your money is going, allowing you to recognize patterns and make adjustments to your operations.

But if you think that’s all the reasons why your small business should have a profit and loss statement, think again. Profit and Loss Statements for each monthly close are important for:

  • Financial performance evaluation,
  • Identifying trends,
  • Expense management,
  • Revenue analysis,
  • Budgeting and forecasting (more on this later),
  • and more!

Record all transactions, invoices, and receipts

Every transaction, whether it’s a sale, purchase, expense, or income, should be accurately recorded. This documentation not only ensures transparency and accountability but also provides a clear trail of your financial activities, accounts receivable, and accounts payable!

Don’t overlook the significance of maintaining well-organized invoices and receipts as well. These documents serve as tangible proof of business transactions, substantiating your financial records in case of audits or inquiries.

By consistently recording transactions, invoicing clients promptly, and archiving receipts systematically, you’re laying a solid foundation for accurate financial reporting, efficient tax filing, and comprehensive insights into your business’s financial landscape.

Focus on bank reconciliation

Once you’ve downloaded your bank statements and are ready to nosedive into the specifics, your next step is to focus on bank reconciliation. The term means cross-examining real-life transactions of the past month to the entries in your bank statement.

This reconciliation process helps identify any discrepancies or errors, ensuring that your financial records align with actual financial activities.

Regularly downloading and analyzing bank statements not only strengthens the integrity of your financial records but also bolsters your ability to make informed financial decisions based on reliable data.

Reconcile other expenses with your cash flow

More than 40% of small businesses fail within the first 5 years because of poor cash flow problems. And that fact is why, every month, you should reconcile every business expense in your journal entries to your cash flow.

It also enables you to identify potential discrepancies, track expenditure patterns, and adjust your budget or financial strategy as needed.

If you’re not sure what counts as other expenses in your small business, here are a few starting points for you:

  • bank fees and charges,
  • taxes,
  • accounting and bookkeeping fees,
  • advertising expenses,
  • insurance,
  • payroll taxes, and
  • utilities!

Review your inventory

If your small business holds any type of inventory, it becomes an integral part of your financial statements too! And so, you should never forget to review your inventory by the end of every month.

Compare your physical inventory level with the level in your books. This way you can catch any differences in quantities, allowing you to work efficiently and responsibly from the next month.

Girl in a bakery doing inventory check and other business recordings
from Pexels.

Review your budgets and KPIs

At the very end of your month-end process, when you’re through with the rest of your checklist, you should sit down to review and analyze your budget variances and KPIs.

For a small business, the slightest change in budget spending can be a turning point. So make sure you review your budgets and update them where necessary.

Furthermore, some of the biggest KPIs for small businesses to track include:

  • Net profit,
  • Gross profit margin,
  • Quick ratio,
  • Website traffic, and
  • Revenue growth rate!

Financial clarity at every month end

By following an easy checklist at the end of each month, your small business will prosper. Our bookkeeping checklist helps you manage your accounting data with ease and be confident in your financial activities.

Intrigued to keep this around as a reminder for every month’s close time? Click here to download our weekly and monthly bookkeeping checklist, absolutely free of cost!

Or bookmark this page and come back to it month to month to simplify your accounting procedures!

Destress Financially With Stanton Financial Co.

If you want to dive head over heels into being the creative mastermind of your brand, Stanton Financial Co. can help you.

Stanton Financial Co. is a premium bookkeeping and CFO service that brings big business strategies to small businesses, solopreneurs, influencers, and content creators.

Unlike most bookkeeping services, we make it easy for you to profitably manage your fluctuating income. Collaborate with brands and focus on doing what you do best– we’ll take care of everything else!

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