Smb Close Month

Close the Month

When to use

Use this at month-end to close the books cleanly: match recorded revenue and fees against payment processors and bank deposits, catch missing entries, and explain the month's P&L in plain language.

Not for: forward forecasting (use smb-cash-flow) or a live status read (use smb-business-pulse). This closes a completed period and never posts to the books without sign-off.

Method

1. Set the period. State the month, the ledger source, and the processors and accounts in scope (bank, Stripe/Square/PayPal, card).
2. Reconcile deposits. Match each processor payout and bank deposit to recorded revenue. Surface unmatched items and processor fees not yet booked.
3. Reconcile expenses. Tie card and bank charges to recorded bills. Flag duplicates, personal charges, and uncategorized spend.
4. Book adjustments. List accruals, deferrals, and corrections, each with amount and reason. Decision point: propose only — do not post without owner or accountant sign-off.
5. Build the P&L. Summarize revenue, COGS, gross margin, operating expenses, and net income vs prior month and vs budget.
6. Write the narrative. Explain the three biggest drivers of the change in plain English.

Anything that changes the books is a proposal for the owner (or their accountant) to approve.

Example

June, QuickBooks + Stripe + bank. Stripe payout $8,420 matched revenue but $310 in fees weren't booked — proposed adjustment. Two $49 charges to the same SaaS vendor on the same day flagged as a likely duplicate. Net income $12,100, up $2,300 vs May, driven by higher repeat orders, lower ad spend, and the un-booked Stripe fees now corrected. Awaiting sign-off on 3 adjustments.

Pitfalls

• Posting adjustments directly. Always propose; the owner or accountant approves every book change.
• Ignoring processor fees. Gross payouts booked as revenue overstate income — reconcile net of fees.
• Force-matching to clear the list. An unmatched item is a signal, not a nuisance; leave it flagged.
• A P&L with no story. Numbers without the top-3 drivers leave the owner guessing.

Output format

Period: <month> | Accounts: <list>
Reconciliation (per account):
  matched $__ | unmatched <n> | fees to book $__
Adjustments proposed (pending approval):
  - <item> — $__ — <reason>
P&L: revenue $__ | COGS $__ | gross $__ | opex $__ | net $__
       vs prior <±> | vs budget <±>
Narrative: top 3 drivers
Open items / sign-off gate

Reference

Month-end close checklist (run in order)

A clean close is a sequence, not a scramble. Work top to bottom; each step feeds the next:

1. Cutoff. Confirm all transactions dated in the month are entered and nothing from the next month leaked in. Verify invoice and bill dates match when the work/goods actually changed hands.
2. Bank reconciliation. Match every line on the bank statement to the ledger. Ending balance on the statement must equal the reconciled ledger balance. Investigate outstanding checks/deposits in transit.
3. Processor reconciliation. For each of Stripe/Square/PayPal: gross sales − refunds − fees = net payout to bank. Book the fees as an expense; don't record gross as revenue.
4. Credit-card & AP reconciliation. Tie every card charge and vendor bill to a receipt/invoice; categorize the uncategorized.
5. AR review. Confirm open invoices are real and current; age them; write off/allow for the truly uncollectible (propose only).
6. Inventory / COGS. Adjust for counts, spoilage, or shrinkage if you carry stock; ensure COGS matches units actually sold.
7. Payroll. Confirm wages, payroll taxes, and benefits are booked in the correct period.
8. Accruals & deferrals. Book expenses incurred but not yet billed (accrue) and prepaid items spread over time (defer/amortize).
9. Owner/personal cleanup. Move any personal charges out of business expense; record owner draws/contributions correctly.
10. Review & lock. Compare P&L and balance sheet vs prior month and budget; explain variances; then propose closing/locking the period so it can't be silently changed.

Common close gaps (the usual suspects)

• Processor fees not booked — the #1 SMB miss; overstates revenue and net income.
• Duplicate bills/charges — same vendor, same/near amount, close dates (auto-pay + manual entry).
• Deposits booked gross — a $10,000 payout that was $10,340 in sales minus $340 fees.
• Personal on the business card — inflates expenses, distorts margin, creates tax risk.
• Uncategorized "Ask my accountant" bucket — clear it every month; it hides both errors and deductions.
• Timing/cutoff errors — December work invoiced in January (or vice versa) throws off the period.
• Sales tax treated as revenue — it's a liability you collected and owe, not income.
• Unrecorded accruals — the utility bill that arrives on the 5th but belongs to last month.

Adjusting-entry types (for the proposals)

• Accrual — record revenue earned or expense incurred but not yet invoiced (e.g., accrue $600 for work delivered, billing next month).
• Deferral — spread a prepaid amount (annual insurance/software) across the months it covers.
• Depreciation/amortization — periodic write-down of an asset's cost.
• Reclassification — move a mis-coded transaction to the right account.
• Correction/reversal — fix or reverse a duplicate or erroneous entry. Each proposed entry needs: account(s) affected, debit/credit amount, and a plain-English reason.

Tie-out targets (what "matched" means)

• Bank: reconciled ledger balance = statement ending balance, to the cent.
• Each processor: recorded net revenue = payouts to bank, with fees separately expensed.
• AR/AP subledgers = the control accounts on the balance sheet.
• Sales tax collected = sales tax liability on the books. Anything that won't tie stays on the open-items list as a flag — never force a match to clear the queue.

The P&L narrative (top-3 drivers)

Numbers need a story. For each of the three biggest month-over-month or vs-budget swings, state: what moved, by how much, and why (one sentence). Example: "Net income up $2,300 vs May: repeat orders up ~$4k, ad spend down ~$1.5k, offset by newly-booked Stripe fees of $310." Distinguish one-offs from trends so the owner doesn't over-read a lucky month.

Owner/accountant sign-off gate

This skill reconciles and proposes; it posts nothing. Every adjusting entry, write-off, reclass, and the period-lock itself is presented for the owner (or their accountant) to approve. Return the change list so the close is auditable after approval.