Month-end close: a checklist for each entity's books

What is the month-end close?

It is finishing the books for one month. Once the close is done, the month's profit and loss and balance sheet shouldn't change. Owners, lenders and CPAs read them as final. Without a close, last month's numbers keep moving as late entries arrive.

What are the steps in a month-end close?

For each entity, in each entity's own books:

1. Record every payment. Card and bank payments collected in the month, including installments on payment plans.
2. Record every payout and fee. Processor payouts are batches. Stripe's payout reconciliation report lists the payments, refunds, disputes and fees each automatic payout settles. See Stripe payout.
3. Clear the holding accounts. Payments waiting in undeposited funds or a clearing account should be matched to a deposit or explained.
4. Reconcile. Each bank and card account against its statement. See bank reconciliation.
5. Match intercompany balances. Each due to in one entity equals the due from in the other. See intercompany reconciliation.
6. Post adjustments. Shared costs, management fees, accruals and deferred revenue.
7. Review the reports. Compare with last month and budget, and explain what moved.
8. Lock the period.

How does a group with several entities close?

One entity at a time, then together. Denver LLC, Phoenix LLC and Portland LLC each close their own books first. The intercompany balances must agree across all three before anyone combines the results. Then the combined view is built with the intercompany amounts removed. See multi-entity accounting.

Two things slow a multi-entity close more than anything else:

• Payments in the wrong entity. A Phoenix customer's payment that landed in Denver's account needs entries in both books and a transfer. Each one found at month end delays two closes.
• Payouts that mix locations. If several locations share one payment account, every payout has to be split by location before it can be posted.

The post on reconciling Stripe payouts per location covers both.

How do you lock a month in QuickBooks Online?

With a closing date. A primary admin or company admin opens Settings, then Account and settings, the Advanced tab, and edits the closing date and password in the Accounting section. QuickBooks' Exceptions to Closing Date report shows any changes made after you closed the books. Each company has its own settings, so a group with several companies sets the closing date in each.

How do you lock a month in Xero?

With a lock date. Xero's help says that after you set one, users can't add or edit transactions dated on or before it. They can still create draft invoices, bills and expense claims, and save draft manual journals. You need the adviser role to set it, under Accounting, then Financial settings, then Lock Dates. Xero has two lock dates: one stops everyone except advisers, and the other stops advisers too. Lock dates can be changed or removed at any time.

How long should the close take?

As long as it takes to get each entity right. Track it. The number of working days from month end to a locked period, per entity, shows where the process is slow. If one entity always closes last, look at how its payments are collected and posted.

General information, not accounting advice.