No business can survive without accurate and current bookkeeping. That’s why a reliable and repeatable month-end closing process is necessary for financial accuracy, compliance, and informed decision-making.
In this guide, we’ll share month-end best practices, expert tips, and a month-end close checklist template to get you started. We’ll also explain how solutions like 8am™ CPACharge can expedite key checklist items like payment reconciliation and reporting.
What is the month-end close process?
The month-end close process is a set of tasks that finalize a business's financial transactions for a prior one-month period. These steps include recording transactions, reconciling accounts, updating the general ledger, and producing financial statements and provide three primary benefits: financial accuracy, compliance, and more realistic cash flow forecasting.
Financial accuracy refers to how well the business's recorded account values match reality. For example, if the books indicate the main checking account balance is $15,000 when it's $5,000, the business may bounce checks and miss payment obligations as a result.
Compliance involves meeting regulatory, reporting, and data privacy standards. Businesses that have investors or may seek outside funding in the future are held to higher standards of accounting compliance.
Cash flow visibility ensures that ongoing obligations, such as payroll, can be met. It also enables growth planning and budgeting.
Financial statements are the primary output of the month-end closing. Once the transactions are recorded and the accounting reconciliation is complete, the income statement, balance sheet, and cash flow statement are prepared to provide important feedback on business growth, operations, and financial health.
Why the month-end is critical for accountants and bookkeepers
If the month-end close process follows best practices, the resulting financial statements should be accurate and complete—in part because the accounting reconciliation process reveals most errors and missing entries. In standard double-entry bookkeeping, debits and credits must balance. This ensures the financial records uphold the basic accounting equation: assets equal liabilities plus equity. As Plymouth University notes, accurate financial reporting forms the backbone of transparency and informed business decisions.
An effective monthly close process also prepares the business for internal and external audits. At any point, the business can generate reliable financial statements for any month that's already been finalized through a monthly closing; there’s no need for scrambling to prepare financial records when a request arises, and minimal risk of inadvertently providing incomplete statements.
Additionally, timely and accurate reporting strengthens an accountant's internal credibility and decision-making power. An accurate set of books is the necessary foundation for making informed decisions, forecasting business growth, and meeting compliance obligations. Depending on the business structure, other leaders outside the accounting function may rely on financial statements to plan their departmental activities. For example, the tax attorney will review financial reports to identify tax risks and opportunities, while operations managers may build their budgets from prior-period results.
2025 month-end close checklist
Whether you’re just starting your accounting practice or have years of experience, you can use the month-end close checklist below to create a repeatable workflow for your team. This checklist is also AICPA-compliant for peace of mind..
Record all incoming payments: Record client payments, attributing them to the proper period and account. Pay attention to any prepayments, which are generally recorded as liabilities.
Reconcile payment processor data: Cross-check client payments against payment gateway reports. If you have a robust payment solution like 8am™ CPACharge, your reporting should include complete transaction details and daily deposits of client funds.
Review accounts receivable: Identify overdue invoices and flag them for follow-up. Implementing a payments dashboard to manage your accounts receivable process can streamline this process.
Record outgoing payments: Record expenses and payments on accounts.
Reconcile bank accounts: Reconciling bank and account statements to accounting records can reveal any missing transactions and discrepancies.
Record depreciation entries. Log monthly depreciation for fixed assets, and note that you may have different depreciation types. Account depreciation entries are necessary for accurate balance sheets and income statements.
Record account amortization entries: If the business has intangible assets, create appropriate account amortization entries.
Record any other accruals or non-cash transactions: You may need to update prepaid expense accounts or recognize revenue that was formerly categorized as an unearned liability. This ensures income statement accuracy.
Reconcile balance sheet accounts: Close out revenue and expense accounts by adding net income to retained earnings. Record any dividends as a deduction to retained earnings. Confirm that all other assets, liabilities, and equity accounts are correct and up to date.
Address compliance requirements: Review transactions for compliance with accepted accounting standards. Incorporating this compliance check can head off compliance issues later. Also review payment data storage, collection, and access to ensure PCI compliance.
Generate preliminary financial statements: With all transactions recorded, you can prepare income statements, balance sheets, and cash flow reports for review.
Management review: Share reports and reconciliations with firm partners for feedback before finalizing.
Finalize and archive records: Save final versions of all reports to ensure compliance with IRS record retention guidelines. Update your month-end close checklist template for next month.
Free downloadable month-end close checklist template
Using a month-end closing template ensures efficiency as you log, track, and monitor your month-end closing activities. You can optimize your closing process by downloading the free template now. Learn more about reporting and reconciliation tools from CPACharge to make it easier to formalize and complete your month-end close.
Step-by-step month-end close process
The month-end close process outlined below builds off the checklist. It includes broader, grouped steps and more detailed descriptions so you can also use it as a training guide for staff.
Record all transactions
Complete transaction reporting is essential for an accurate set of financial records. Cash and non-cash transactions affect profitability and financial resilience. Miss any transaction, and the income statement, balance sheet, and cash flow statement will not be accurate.
Non-cash transactions can be easily overlooked because they don't affect bank account balances; pay attention to account depreciation, amortization, and bad debt expenses. Businesses that use accrual accounting will watch prepaid expenses and unearned revenue accounts.
Reconcile bank accounts and payment processor data
The accounting reconciliation process ensures data accuracy by comparing two sets of financial records, usually an external source and an internal source. Any differences between the external and internal sources should be timing-related only, such as a check payment that has not yet cleared.
External sources include bank statements and payment processor reporting. CPACharge reporting, for example, itemizes all client credit card and ACH payments. The data should confirm inflows that appear on the bank statements. You can see this in action when you book a demo.
Review and adjust journal entries
Non-cash expenses and accruals require adjusting journal entries. The purpose of these, including depreciation and amortization entries, is to align with the matching principle of accounting, which requires recognizing corresponding revenue and expenses in the same period.
The matching concept is a primary theme of the Financial Accounting Standards Board's Generally Accepted Accounting Principles (GAAP).
Verify financial statements
You can validate financial statements with an objective review plus comparisons to projected statements for the same period. This is an important step, since presenting error-prone financial statements to senior leadership would reduce confidence in the accounting team. Also, the team closest to the transactional data is the best equipped to spot mistakes.
Management review and sign-off
As a last check, management will review and approve the final versions of the financial statements. With management approval, the statements can be shared with appropriate leaders or team members to inform tax planning and strategic decisions. Since the financial statements may also be provided to current or prospective investors, they must be accurate.
In a small firm, management review may involve the partners. Larger firms may have a CFO or controller to handle the final sign-off.
Common challenges in the month-end close
The month-end close process can be complex and time-consuming. The number of transactions to verify alongside the need for 100% accuracy presents some common challenges, including:
Missing documentation: A process audit may be needed if you are regularly hunting for missing documentation during the month-end close. Review how transactional documentation is currently managed and establish new workflows to overcome gaps.
Late payments: Late payments complicate compliance with the matching principle. You can improve collections with a payment solution that provides a full range of payment options and automated reminders.
Data entry errors: Data entry errors can extend the account reconciliation process. Consider flagging and reviewing all data entry issues periodically to identify if they can be prevented with process changes.
Manual reconciliation delays: Manual reconciliation processes can create bottlenecks. Consider implementing a solution like CPACharge that automates deposit reconciliations. The software automatically matches client payments to deposits from your bank statements.
Compliance considerations in the month-end close
A secure, accurate month-end close isn't just good practice—it is a compliance requirement for accountants, tax professionals, and law firms. Ignoring these standards can result in financial penalties, reputational damage, or poorly informed strategic priorities.
Consider incorporating PCI compliance, IRS recordkeeping standards, GAAP considerations, and industry best practices into your closing processes.
PCI compliance practices protect credit card data from theft. Compliance involves proper handling and storage of credit card numbers, plus annual reviews of security protocols.
IRS recordkeeping standards recommend storing employment tax records for at least four years and other documents at least long enough to support tax return data.
GAAP accounting requires careful matching of expenses with the revenue they helped create.
Industry-specific best practices may include additional regulations mandated by the SEC or FINRA.
Make every month-end close easier with 8am™ CPACharge
An efficient, compliant month-end close process delivers accurate financial insight, protects client trust, and frees up more time for strategic work. It's also a process that should be operationalized and repeated because that consistency will drive efficiency and accuracy.
Implementing strategies from this guide will reduce administrative burden and stress while gaining quicker insights into business performance. Solutions like CPACharge can also help automate payment collection, simplify reconciliation, and produce audit-ready reports.
See how CPACharge can help you close your books faster and with confidence—schedule a demo today!
FAQs about the month-end close process
What is the month-end financial closing process?
The month-end closing process involves completing, reviewing, and finalizing a business's financial records for the prior month. The core tasks are reviewing transactions, creating journal entries, reconciling accounts, preparing reports, and performing compliance checks.
What is the accounts payable month-end close process?
Accounts payable or AP month-end closing involves validating and updating a business's payable records for a prior month. This essential component of accounting reconciliation requires invoice reviews, expense accruals, and reconciliation of vendor statements.
How do you close the month-end in accounting?
The month-end close process records and finalizes transactions from a prior-month period. The broad steps include recording financial transactions, reconciling accounts, and preparing financial statements. Accountants can also use CPACharge to expedite account reconciliation.
What does a checklist for accounting month-end closing include?
A concise month-end close checklist template should include recording all transactions, reconciling all accounts, reviewing and adjusting journal entries, and preparing final financial statements.