Monthly Close Process: A Checklist for Startups
A step-by-step guide to closing your books each month, with a practical checklist and timeline to ensure accurate, timely financial reporting.
The monthly close is when you finalize your books for the prior month, ensuring all transactions are recorded, categorized correctly, and your financial statements are accurate. It's the foundation of reliable financial reporting.
Many startups either skip this process entirely (leading to perpetually messy books) or make it far more complicated than necessary. This guide provides a practical, startup-appropriate approach to monthly close.
The Goal
Complete, accurate financial statements within 10-15 business days of month-end. This gives you timely information for decisions, board reporting, and investor updates.
What Is the Monthly Close?
The monthly close is a systematic process of finalizing all financial transactions for a month and producing accurate financial statements. When you "close the books," you're drawing a line under that period and saying "these numbers are final."
The Close Process Includes:
Recording & Categorizing
Ensuring all transactions are entered and properly categorized
Reconciliation
Verifying your books match your bank statements and other sources
Adjusting Entries
Recording accruals, prepaids, depreciation, and other adjustments
Review & Finalization
Reviewing for errors and locking the period to prevent changes
The output is a set of financial statements: income statement (P&L), balance sheet, and cash flow statement that accurately reflect that month's activity.
Why Monthly Close Matters
Timely Decision-Making
You can't make informed decisions with stale data. Monthly close ensures you have current financials to guide strategy.
Board & Investor Reporting
Your board expects financial reports. Without a close process, you can't produce them reliably or on time.
Error Detection
Regular closes catch errors when they're fresh. Finding a mistake from 6 months ago is much harder than finding one from last month.
Audit Readiness
If you ever need audited financials, a consistent close process is essential. Auditors want to see systematic, documented procedures.
The Cost of Skipping Close
Startups that don't close monthly often discover major issues right before fundraising. We've seen companies spend $50K+ on emergency accounting cleanup because they hadn't closed their books in a year. The monthly investment in close process is far cheaper than crisis remediation.
The Complete Close Checklist
Here's a comprehensive checklist for startup monthly close. Not every item will apply to every company—adapt based on your specific situation.
Phase 1: Transaction Processing
Record any invoices received but not yet entered
Process any expense reports waiting for approval
Review auto-imported transactions for correct categorization
Ensure all charges are properly categorized with descriptions
Enter any manual invoices not auto-synced from billing system
Phase 2: Reconciliation
Match QBO/Xero balance to bank statement; investigate differences
Match to credit card statements for each card
Match A/R aging to billing system; follow up on past-due
Verify outstanding bills match actual obligations
Match payroll entries to payroll provider reports
Phase 3: Adjusting Entries
Move deferred revenue to recognized revenue per ASC 606
Accrue for expenses incurred but not yet billed (legal, etc.)
Expense the monthly portion of annual insurance, software, etc.
Monthly depreciation for fixed assets (if applicable)
Monthly expense for stock options/RSUs (if applicable)
Phase 4: Review & Finalization
Compare to prior month and budget; investigate anomalies
Verify all balance sheet accounts make sense and are documented
Run trial balance to confirm books are in balance
P&L, Balance Sheet, Cash Flow Statement
Set closing date in accounting software to prevent changes
Close Timeline
A well-organized close follows a predictable timeline. Here's a typical schedule for completing close within 10-15 business days:
| Days After Month-End | Tasks | Owner |
|---|---|---|
| Day 1-3 | Collect final invoices, ensure all transactions are in system, begin bank reconciliation | Bookkeeper |
| Day 4-5 | Complete all reconciliations (bank, credit card, A/R, A/P), categorize all transactions | Bookkeeper |
| Day 6-8 | Record adjusting entries (revenue recognition, accruals, prepaids, depreciation) | Bookkeeper/CFO |
| Day 9-10 | Review financials, investigate variances, make final adjustments | CFO/Controller |
| Day 11-15 | Finalize and distribute reports, lock period, prepare management commentary | CFO |
Speeding Up the Close
As you mature, aim to shorten your close timeline:
Common Issues and Solutions
Bank Reconciliation Doesn't Balance
Cause: Duplicate entries, missed transactions, or incorrect amounts.
Solution: Sort transactions by amount and look for duplicates. Check for transactions that might be in the wrong month. Compare statement line-by-line if necessary.
Missing Invoices
Cause: Vendors haven't sent invoices; expenses incurred but not recorded.
Solution: Accrue for known expenses even without invoice. Follow up with vendors on expected invoices. Build a list of recurring expenses to check.
Inconsistent Categorization
Cause: Different people categorizing differently; unclear guidelines.
Solution: Create a categorization guide for your top vendors/expense types. Review categorization monthly for consistency. Use rules in QBO/Xero.
Deferred Revenue Doesn't Reconcile
Cause: Contract tracking is incomplete; recognition calculations are wrong.
Solution: Maintain a revenue schedule that tracks each contract's deferred balance. Reconcile the schedule to the GL monthly. See our revenue recognition guide.
Close Takes Too Long
Cause: Waiting for information, manual processes, no clear ownership.
Solution: Set clear deadlines for expense submissions. Automate bank feeds and categorization. Assign specific tasks to specific people with dates.
Tools and Automation
The right tools make monthly close much easier. Here's what most startups use:
Accounting Software
QuickBooks Online or Xero for most startups. Set up bank feeds, create categorization rules, and use closing date feature.
Tip: Enable two-factor auth and limit who can make changes to closed periods.
Expense Management
Ramp, Brex, or similar corporate cards with auto-categorization and receipt capture. Reduces manual expense entry significantly.
Tip: Set up integrations to sync transactions automatically to your accounting software.
Billing System
Stripe, Chargebee, or similar for subscription billing. Should sync invoices and payments to accounting software.
Tip: Ensure the integration handles revenue recognition correctly, or plan to adjust manually.
Payroll
Gusto, Rippling, or similar. Should sync payroll entries to accounting software automatically.
Tip: Verify the integration is mapping to correct GL accounts. Review first few syncs carefully.
Close Checklist Tools
For tracking the close process itself, a simple spreadsheet works early on. As you grow, tools like FloQast, Numeric, or even Notion/Asana with a checklist template can help coordinate multi-person close processes.
Improving Your Close Process
If You're Not Closing Monthly Yet
Start with a "catch-up" close, then establish a monthly cadence:
Continuous Improvement
After each close, do a quick retrospective:
- What delayed us this month?
- What errors did we catch? How can we prevent them?
- What manual work could be automated?
- Is our timeline improving?
When to Get Help
Consider bringing in a fractional CFO if:
- Your close regularly takes more than 3 weeks
- You don't trust the accuracy of your financials
- You're preparing for a fundraise and need to clean things up
- You want to establish proper policies and procedures
- Your bookkeeper needs guidance on accrual accounting
Related Articles
Startup Accounting 101
Complete accounting fundamentals guide
SaaS Revenue Recognition
Critical for proper close
Chart of Accounts Template
Foundation for clean books
Board Decks & Investor Reporting
What to do with your closed financials
Need Help With Your Monthly Close?
Eagle Rock CFO helps startups establish efficient close processes and build reliable financial reporting. Get your books in order and keep them that way.
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