Month-End Close in Hours, Not Days: The Actual Steps

So the month-end close is the thing that eats the first week of every month for a lot of owners and bookkeepers, and when I ask people why it takes four days, the answer is never one thing. It's that you're waiting on a statement, then you're hunting for a deposit that turns out to be five payments, then you're categorizing 200 transactions one at a time, then you're chasing receipts, then you find out the books don't tie to the bank and you go back to the beginning. Four days of that.

And most of it isn't accounting. It's matching. So this is the order I'd do it in, and then how most of it can happen during the month so the close becomes a review instead of a project.

One. Payouts first, before you touch anything else

If you take cards, your bank shows a deposit and your processor shows a pile of charges, refunds and fees that add up to it. Start there. Stripe's balance report lays it out as gross, fees and net by category, and the net of a payout is what actually landed in the bank. Match each payout to its deposit and you've just explained the biggest chunk of your bank activity in one pass, and you've booked the fees while you were at it, which is the line people forget and then can't find at step six.

Two. Clear undeposited funds

Every payment you recorded that hasn't been tied to a deposit yet is sitting in QuickBooks' Undeposited Funds, which Intuit describes as a temporary lockbox. Five checks become one deposit. If this account has a balance at month end that you can't explain, your reconciliation is never going to come out to zero, so empty it now, not at step six.

Three. Categorize what's left, with rules

By now the card activity and the customer payments are handled, and what's left is the miscellaneous stuff, the software subscriptions, the fuel, the supply run. Most of it recurs. The vendor that got categorized as office supplies last month is office supplies this month. So the first time you touch a vendor, write the rule, and the second month it's already done. What's genuinely new should be a short list.

Four. Age the receivables and write down what's dead

Pull who owes you and for how long. Anything past 90 days that hasn't responded to two attempts, you should be honest about, because carrying dead receivables makes the business look healthier than it is and makes the next step harder. We went through invoiced money versus real money a few weeks ago, and this is where that shows up in the books.

Five. Bills and what you owe

Same thing on the other side. What came in, what's been paid, what's due next month. If a bill was paid from the bank but never entered, it shows up as an unexplained transaction at step six, so enter it here.

Six. Reconcile to zero

Now, and only now, reconcile each account. QuickBooks' own reconciliation steps are simple. Have the statement ready, make sure every transaction for the period has been entered and categorized, check off each one that matches the statement, and keep going until the difference is $0.00. If you did steps one through five, this is checking boxes. If you skipped them, this is where the four days come from, because every mismatch sends you back up the list.

Seven. Then read the numbers

Only after the books tie out do you look at the P&L and the cash. Reading them before that is reading a draft, and drafts move once the payouts get matched and the dead receivables come off.

Why it should take hours

None of steps one through five need to wait for month end. Payouts can be matched the day they land. Undeposited funds can be cleared daily. Categories can be applied as transactions come in. Receivables can be aged every week. If all of that happens during the month, the close on the first is step six and step seven, which is an hour of checking boxes and an hour of reading. That's the whole trick. The close is slow because it's when everybody catches up. Stop catching up.

That's what Liaison does with the books during the month. Every night it matches payouts to deposits, proposes a category for anything new with the record it based that on, and ages the receivables, so by the first the pile is gone and what's waiting for you is a short list of the things it couldn't decide. Your bookkeeper still reconciles, but they reconcile something that already ties.

If your close is taking days and you can't say which of these seven steps is eating them, bring me a month and we'll find it.