Month-End Close Checklist for a Service Business

Purpose

Define the month-end close process for a service-business bookkeeper. The close is the discipline of locking the prior month's books so the financial statements are trustworthy. Skip the close and the P&L drifts: revenue recognized at the wrong time, expenses missed, bank reconciliations weeks behind, the management report that the owner reviews based on stale numbers. Run the close consistently and the financial statements are reliable enough to drive every operational decision below them.

Scope

Applies to:

• Sole-proprietor, partnership, and corporation trade businesses
• Cash-basis and accrual-basis books (some steps apply to accrual only and are flagged)
• Businesses using QuickBooks Online, QuickBooks Desktop, Xero, or equivalent

Excludes:

• Quarterly tax close (separate process; the month-end feeds quarter-end)
• Year-end close (extends the monthly with additional reconciliations)

Responsibilities

• Bookkeeper runs every step
• Owner / GM reviews the closed financials and signs off
• CPA reviews quarterly; does not run the monthly close

Timing

Close the prior month within five business days of month-end. Day 1 begins the first business day of the new month. Closing later than day 10 means the owner's monthly review is on month-old data; decisions made on that data are stale.

Procedure

Step 1. Bank and credit card reconciliation (Day 1 to 2)

Reconcile every operating bank account and every credit card to the statement.

• Pull the statement for the closed month (downloaded PDF or direct bank feed)
• Run the reconciliation in the accounting system
• Investigate every uncleared item over 30 days old
• Investigate every cleared item with no matching entry in the books
• Confirm ending balance matches the statement to the penny

A reconciliation that does not balance is the most common close failure. Stop at this step; do not move forward until every account ties out.

Step 2. Accounts receivable review (Day 1 to 2)

Run the AR aging report.

• Verify all invoices for the month are in the system
• Verify any work performed in the prior month but not invoiced is invoiced now (accrual-basis books) or noted for next month (cash-basis but planning ahead)
• Review the over-30, over-60, over-90, and over-120 day buckets
• Adjust or write off any uncollectibles per the credit policy
• Note customer disputes that need resolution

Step 3. AP, sales tax, payroll (Day 1 to 2)

Run the AP aging report. Verify all vendor bills for the month entered; accrue any expense incurred but not yet billed (accrual basis); match vendor statements; schedule payments per cash flow. For accrual basis, do not close until all known expenses are accrued. A subcontractor who worked the last week of the month and bills the next month requires a month-end accrual to land the expense in the correct period.

Sales tax: run the liability report, confirm collected equals payable on the balance sheet, file and pay the prior period's return, verify exemptions documented.

Payroll: for each run, confirm gross wages match the payroll provider, tax liabilities match what was deposited, workers comp accrual is current, 401(k) and HSA contributions reflect as both expense and liability, payroll clearing account reconciles to zero.

Step 4. Inventory, job costing, owner draws (Day 2 to 3)

Inventory: reconcile physical truck stock to system count (sample one truck per month minimum, full count quarterly), adjust for shrinkage/damage/returns, confirm parts used flowed to COGS. Skip if parts go directly to COGS at purchase; verify quarterly that cash-basis treatment produces accurate gross profit by job class.

Job costing: roll up labor, materials, subcontractor cost, other direct cost into completed jobs; confirm jobs marked complete have full cost captured; calculate gross profit per job; investigate outliers. Input to gross-profit-by-job-class report.

Owner draws: verify draws and distributions are coded to Equity not Expense; confirm S-corp reasonable compensation per IRS guidance; reclassify any personal expenses run through the business to Owner Draw. The most-common P&L distortion: a personal Costco run coded as "Office Supplies" overstates expense and understates owner pay.

Step 5. Depreciation, prepaids, recurring JEs (Day 3, accrual basis)

Post monthly depreciation (Debit Depreciation Expense, Credit Accumulated Depreciation) from the CPA's fixed-asset register; add any new asset purchases. Cash-basis books skip until year-end. Amortize prepaid expenses (insurance, software, dues): monthly portion as Debit Expense, Credit Prepaid Expense.

Post standing journal entries: accrued vacation/PTO change; warranty reserve accrual; deferred revenue recognition for prepaid maintenance plans; S-corp owner reasonable compensation accrual; loan principal/interest split (principal to liability, interest to expense).

Step 12. Financial statement preparation (Day 4)

Run the three financial statements:

• Balance Sheet (verify it balances; assets equal liabilities plus equity)
• Profit and Loss (verify revenue, COGS, OpEx are categorized correctly; gross profit and operating profit calculate)
• Cash Flow Statement (verify it reconciles to the change in cash on the balance sheet)

Generate the management report (KPI dashboard) for owner review.

Step 13. Owner review and sign-off (Day 5)

The bookkeeper meets with the owner / GM for 30 minutes to walk the closed financials.

• Compare actual vs prior month, vs same month prior year, vs budget if one exists
• Identify variances and the explanation for each
• Owner signs off on the close

Once the owner signs off, lock the period in the accounting system. QuickBooks Online: Settings > Account and Settings > Advanced > Close the books. Setting a close date with a password prevents the bookkeeper from accidentally posting to a closed period.

Step 14. Backup and archive (Day 5)

• Export the closed financials as PDF (Balance Sheet, P&L, Trial Balance, Bank Recs, AR Aging, AP Aging)
• Save in the monthly close folder
• Backup the accounting system (QuickBooks Desktop) or verify cloud backup (QuickBooks Online)

Records and retention

Retain the closed-month financial statement PDFs, bank reconciliations, and supporting documents for seven years (IRS recordkeeping requirements under IRC Section 6001).

Common close failures

• Bank reconciliation does not balance. Stop and resolve before continuing. A persistent imbalance is usually an unrecorded transaction or a duplicate.
• AR shows large old balances with no notes. Aging is not actionable without write-off discipline.
• Owner draws coded to Expense. Distorts the P&L; redo before owner review.
• No close date set. Bookkeeper accidentally posts to a closed month; year-to-date numbers shift weeks later.
• Owner sign-off skipped. No accountability; errors compound.

References

• IRS Publication 538 - Accounting Periods and Methods
• IRS Publication 583 - Starting a Business and Keeping Records
• 26 USC 6001 - Notice or Regulations Requiring Records, Statements, and Special Returns
• AICPA Statement on Standards for Accounting and Review Services (SSARS) No. 21
• Intuit QuickBooks Online Closing the Books documentation