A month-end bookkeeping checklist for small businesses.

What "closing the month" means

A month-end close is a short routine you run after each month finishes. You check that every transaction is in the software, that it is coded correctly, and that the balances agree with outside evidence such as bank statements and supplier statements. Then you lock the month so nothing changes it by accident.

The result is a set of figures you can trust. Your profit and loss shows what the month really earned. Your balance sheet shows what you own and owe at the last day of the month. Every later job, from a VAT return to the year-end accounts, starts from those numbers.

Work through the sections below in order. Each one depends on the one before it. There is little point reviewing your profit if the bank is not reconciled yet.

1. Set the cut-off

• Pick the date. For most businesses it is the last calendar day of the month. If your financial year ends on another date, use the matching day each month.
• Wait for the statements. Card and bank statements often arrive a few days after month end. Bank feeds help, but the statement is the evidence you check against.
• Agree what counts. A sale belongs to the month the work was done or the goods were supplied. A bill belongs to the month the cost was incurred, not the month you paid it.

2. Reconcile every bank and card account

This is the core of the close. Match every line on the statement to an entry in your software, then check that the closing balances agree. Our guide to bank reconciliation covers the method step by step.

• All current accounts. Including any second account or savings account the business holds.
• Business credit cards. Reconcile to the card statement, and check the repayment from the bank account clears the card balance.
• Payment platforms. PayPal, Stripe, card terminals and marketplace balances hold money too. Treat each one as its own account.
• Petty cash. Count the cash in the tin and compare it with the cash account in the software.
• Transfers. Money moved between your own accounts should show on both sides and net to zero.

If the closing balance does not agree, stop and find the difference before moving on. A missing line, a duplicate, or a line on the wrong date is the usual cause.

3. Check sales and money owed to you

• Every sale is invoiced. Compare jobs completed or orders shipped with the invoices raised. Raise anything that was missed.
• Receipts are allocated. Each customer payment should be matched to the invoice it pays, not left sitting as an unallocated credit.
• Review the aged debtors report. List what is overdue and decide who to chase this week.
• Platform sales are complete. If a platform pays you net of fees, record the gross sale and the fee separately, so both are right.

Late-paying customers are one of the most common causes of a cash squeeze. Our guide on what cash flow means in business explains why profit and cash can look so different.

4. Check bills, receipts and money you owe

• Every bill is entered. Look through the finance inbox and any post for invoices dated in the month.
• Every card payment has a receipt. Make a list of payments with no paperwork and request copies now, while they are easy to find.
• Payments are allocated to bills. A supplier payment with no bill against it often means a bill is missing.
• Compare supplier statements. For your main suppliers, check their statement against your ledger. Differences point to missing bills, credit notes or payments.
• Review the aged creditors report. Confirm what is due soon, so it can be planned into cash.

Keep the paperwork as well as the entries. Our guide on how long to keep business records sets out the retention periods.

5. Payroll and CIS

If you run payroll, the month-end figures should match the payroll reports.

• Post the payroll journal. Gross pay, employer National Insurance, pension contributions and the amounts owed to HMRC and the pension provider.
• Check net wages. The wages paid from the bank should clear the net pay liability to zero.
• Check the PAYE liability. If you pay HMRC monthly, the payment is due by the 22nd of the next tax month, or must reach HMRC by the 19th if you pay by cheque through the post.

Construction contractors have one more monthly job. The CIS monthly return is due by the 19th of the month after the tax month ends. Tax months run from the 6th of one month to the 5th of the next. A return filed late gets a £100 penalty, rising after 2, 6 and 12 months. Record CIS deductions on subcontractor bills so the return and the books agree. See how CIS tax works for the wider picture.

6. VAT, if you are registered

• Check the VAT codes. Scan the month for purchases with no VAT that should have it, and the reverse. Look closely at large items and new suppliers.
• Only claim with a valid invoice. A card receipt alone may not be enough to reclaim VAT.
• Review the VAT control account. Its balance should equal the VAT owed for the periods not yet paid.
• At quarter end, run the return. The return and payment are usually due one calendar month and 7 days after the period ends. Closing each month first leaves little to do in that window.

Our guide on how to file a VAT return covers the filing itself.

7. Balance sheet checks

Most errors that survive the bank reconciliation show up on the balance sheet. Go through it line by line. If you are not sure what each line means, start with how to read a balance sheet.

• Suspense account. It should be empty. Anything parked there needs an answer.
• Director's loan account. For a limited company, check personal spending and money the director put in are recorded here, not in expenses or sales.
• Loans and finance agreements. Compare the balance with the lender's statement. Split repayments between capital and interest.
• Accruals and prepayments. Add costs you have used but not yet been billed for. Spread costs paid in advance, such as annual insurance, over the months they cover.
• Fixed assets and depreciation. Add new equipment as an asset, not an expense, if it will last. Post depreciation if you do it monthly.
• Stock. If stock matters to your business, update the value from a count or your stock system.

8. Review the profit and loss

Now read the month's figures as a business owner would. Compare them with last month and the same month last year.

• Does sales income look right for the work you know was done?
• Has any cost category jumped or vanished? A missing monthly direct debit usually means a coding error.
• Is gross margin in its normal range? Our guide to the gross profit formula shows how to work it out.
• Are any one-off items explained, so they do not distort the picture?

9. Lock the month and report

• Set a lock date. Most bookkeeping software lets you stop changes before a date. Use it once the checks are done.
• Write a short summary. Sales, gross profit, overheads, net profit, cash at the bank, money owed in and out, and any VAT or tax due soon.
• List open items. Missing receipts, unanswered questions and anything left in suspense, so next month starts with them.

How long a month-end close takes

It depends almost entirely on how much was done during the month. If transactions are matched as they arrive, month end is a short review. If nothing was touched until the month ended, the close turns into a month of catch-up squeezed into a few days. Our comparison of daily and monthly bookkeeping looks at that trade-off in more detail.

If several months have been missed, close them one at a time from the oldest. Each month's closing balances become the next month's opening position, so working out of order causes rework. A catch-up brings the books current before a monthly routine starts.

The same routine also makes the year end easier. Twelve closed months leave far less to fix when year-end accounts are prepared.