What Is Month End Close and Why Does It Matter?
Month end close is the process of finalizing your financial records for the month — every transaction recorded, accounts reconciled, statements accurate. Here's what happens and why it matters.
Month end close is the process of finalizing your financial records for the month — making sure every transaction is recorded, accounts are reconciled, and your financial statements accurately reflect what actually happened. It's the equivalent of balancing the books before you turn the page.
It matters because everything downstream — tax filings, business decisions, financial planning — depends on books that are accurate and up to date.
What Happens During Month End Close
Your Mesa CPA bookkeeping team works through a checklist each month. The main steps:
1. Ensure all transactions are recorded
All bank feeds are reviewed and categorized. Missing transactions (cash purchases, personal card expenses, transfers) are added. Nothing is sitting uncategorized.
2. Reconcile all accounts
Bank accounts, credit cards, and lines of credit are reconciled against statements. The QBO balance matches the bank balance.
3. Review accounts receivable
Open invoices are reviewed. Anything overdue is flagged to you for follow-up. If any invoices are uncollectable, they may be flagged for write-off.
4. Review accounts payable
Outstanding bills are reviewed. Anything past due is flagged. Upcoming obligations are confirmed.
5. Accrue outstanding items
If significant expenses have been incurred but not yet billed (e.g., month-end rent, accrued payroll), they're recorded so the P&L reflects the true cost of the period.
6. Reconcile payroll
Payroll totals are confirmed. Source deduction remittances are verified. Payroll liabilities on the Balance Sheet are cleared.
7. Review GST/HST
If you're on a quarterly or monthly filing schedule, the tax collected and ITCs are reviewed and the return is prepared.
8. Generate financial statements
With the books finalized, the Profit & Loss and Balance Sheet are generated for the month. These are the numbers you review.
Why It Matters
Decisions based on wrong numbers are wrong decisions. If your books are two months behind, your P&L doesn't reflect reality. You might think you're profitable when you're not, or miss that a major expense hit.
Tax filings require accurate books. GST/HST returns, payroll remittances, and corporate tax returns all depend on the underlying bookkeeping being correct.
Year-end is much faster. A business that closes every month reaches year-end with 12 clean monthly closes already done. A business that defers everything faces a massive catch-up — which costs more in accounting fees and delays filing.
FAQ
How long does month end close take?
For a well-organized small business, a few hours to a few days depending on transaction volume. Your Mesa CPA bookkeeping team handles this — your involvement is typically limited to reviewing the final numbers and flagging anything that looks off.
What if my books are several months behind?
The further behind, the more work to catch up. Each month needs to be closed in order — you can't skip. Prioritize getting current as quickly as possible. Let your Mesa CPA team know and they'll estimate the catch-up effort.
Do I need to do anything for month end close?
Primarily: respond promptly when your bookkeeper asks for clarification on transactions, submit any outstanding receipts, and review your P&L once it's ready. The more responsive you are, the faster close happens.
What's the difference between close and reconciliation?
Reconciliation is one step within close — confirming your QBO balances match your bank statements. Close is the full process of finalizing all accounts, reviewing all statements, and locking the period.