I get asked all the time: “What does closing the books actually mean?” It sounds more intimidating than it is.
Closing the books is simply making sure everything in your accounting software matches what happened in your bank accounts that month.
You are reconciling, categorizing, and reviewing your numbers so you know where you stand. Many owners skip this step. They are busy or overwhelmed and plan to catch up later. Over the past decade with small businesses on Cape Cod, I have seen that those who stay on top of monthly books sleep better, catch mistakes early, and avoid scrambling at tax time.
Here is what I do with clients every month. It is not complicated, and once you have a rhythm, it takes less time than you think.
Why does reconciling matter?
Bookkeeping is not always fun, but it makes everything else easier.
When you close your books monthly, you know your cash, see expenses that are creeping up, and spot late payers before they become ninety-day problems. Your accountant is not chasing you for missing items in April.
I have cleaned up files after six months or more without reconciliation. We found duplicate payments, missing invoices, and miscoded expenses. It took weeks to untangle.
I am a stickler because I have seen what happens when it is skipped.
What should you do every month?
Here is a process that works for most clients. Adjust as needed.
1. Reconcile your bank and credit card accounts
This is non negotiable. Open your bank statement and your accounting software (QuickBooks, Xero, etc.) and compare every transaction. Do the balances match? If not, why? Look for missed entries, duplicates, or bank fees you did not notice.
Do not click “add” in the bank feed without verifying. That creates bigger problems later.
Do not forget credit cards. Many new clients have months of unreconciled cards. Insider tip: that is where the biggest messes hide.
2. Make sure everything is categorized correctly
After reconciling, review categories. This matters. Misclassifying office supplies as equipment inflates assets. Mixing personal and business causes tax issues. In construction, missing job cost coding means you do not know which projects earn money.
If you are unsure, ask your bookkeeper or accountant.
3. Check who owes you and who you owe
Run accounts receivable. Who has not paid and for how long? Follow up and collect.
For construction, this is critical. Fifteen days late is one thing. Ninety days is a problem.
Then review payables. What is due? Pay subs and suppliers on time. Your reputation matters.
4. Run your reports and actually look at them
Pull Profit and Loss, Balance Sheet, and Cash Flow. If you track job costs, run that too. Reports tell a story. Are you profitable? Which expenses rose? Is cash tight?
Many people run reports but do not use them. If the numbers are confusing, learn the basics or work with someone who can explain them. I offer reporting services for exactly this.
If you are in construction, add these steps
Construction accounting is more complex. You track costs by job, handle retention, manage subs, and juggle multiple projects.
At month end, review the following:
- Review job costing to see which projects are profitable
- Check work in progress reports to track costs on active jobs
- Reconcile subcontractor accounts
- Make sure change orders are billed and recorded
If you are not doing this, you are missing critical information about your business.
Mistakes that I often see
After years helping clients with bookkeeping and accounting systems, the same problems appear again and again:
Skipping reconciliation. Errors pile up and the books become unreliable.
Mixing personal and business. Use separate accounts. Everything is easier.
Waiting until the last minute. Block two hours at month end and make it routine.
Running reports but not using them. The point is to make decisions with the data.
Trying to do everything when you are overwhelmed. If this takes five hours and you lack confidence in the results, consider handing it off.
When it makes sense to outsource
If you dread it every month, something is not working. Find the weak spot.
If bookkeeping pulls you away from revenue work, if you are behind, if reports do not make sense, or if your industry is complex (construction, retail), outsourcing often makes sense.
I offer monthly bookkeeping and cleanup projects to get you back on track.
Final Thoughts
Closing your books monthly does not have to be painful. With a routine, it becomes a normal part of running your business. The peace of mind from knowing your numbers is worth it.
If you want help getting set up or would rather hand it off, I am here. Let us talk.