Chapter 3.  Monthly bookkeeping and accounting month-end close

So far you have tailored the accounting software settings to work the way you desire, the next step is to put it to work. Each month, there are two accounting tasks that are mandatory: bookkeeping, and month end close.

1.     Bookkeeping - record financial transactions into accounting system

Bookkeeping is recording all the financial transactions into your accounting software on a monthly basis. Mature companies generally record transactions and do bookkeeping on a daily basis, but early stage startups mostly get the bookkeeping done monthly. It really depends how fast you need to tidy up your accounting records.

Add financial transactions into your accounting books - revenue and expenses

In the context of using online accounting software such as QuickBooks Online (QBO), bookkeeping means to add auto-imported transactions into QBO in the right accounts.

How to ensure the accuracy when recording transactions:

There are two criteria you will need to follow:

  1. GAAP: is short for General Accepted Accounting Principles. It is the standard adopted by U.S. securities and exchange commissions. All companies in the U.S. must follow these principles.


  1. Consistency: GAAP defines the general direction of how you need to record financial transactions; companies then need to record this information consistently, in the books. For example, if you have been recording Google suite expenses as office software, instead of subscription, then you will need to do that consistently.

2.     Accounting month-end close – complete, review and reconcile financial data

In accounting, month-end close means you recorded all transactions from that month, reviewed them to make sure they are correct, and reconciled bank and credit card accounts. Here are some the tasks you need to do for month-end close:

  1. Reconcile your bank and credit card accounts

The goal here is to verify that you have the same dollar amount in your bank account and in your accounting books. This step serves as a foundation for verifying the accuracy of money movement; if someone were to review your accounting books, they would start from your bank reconciliations. Make sure that you have reconciled all the bank accounts for the month and that the ending balances from the bank match with your accounting books (otherwise there may be a problem).

  1. Record the depreciation expense for fixed assets

Don’t forget to deduct the expenses that are not directly money related, for example, fixed assets. Record the depreciation expense for your fixed assets, such as expensive lab equipment, a company car, etc.

  1. Write off bad debt

Bad debt is money you’re not able to collect from doing a service or delivering goods. 

Here’s how the process typically plays out: 

You send invoices > You try to collect payment > You realize they’re never going to pay you = bad debt. 

Keep in mind, you still need to create a record of every effort you made to collect payment from your customer. If you get audited, you’ll need to show proof (e.g. emails, letters, reminders sent to customers).

  1. Set up any accrual entries

Let’s say a worker puts time in for the firm but hasn’t been paid as of month end—that’s when an accrual entry needs to be set up (Wages Payable). If that’s the case, then you need to ask if there are any bills that need to be paid (which haven’t been) or any cash owed to you. Once that’s done, an accrual entry needs to be set up to reflect that. Experienced accountants and CPAs usually have a list of accrual entries they know most companies need to record. Make sure to check with them on this. Like with many tips in this guide, it’ll save you time, money, and effort.

Why month-end close is key

The month-end close process is used to make sure financial transactions for the month have been organized and recorded following GAAP. As a business grows, so do financial transactions. For most companies, it takes 10 - 20 days to do the month-end process and close the book. But it all depends on the volume of transactions. The month-end close process groups the financial data into around 30-day periods of time (monthly), so you can stay consistent with how your financial data is being recorded and compared.

A CPA’s 2 Cents 

You want to be able to compare apples to apples. Founders need to be able to compare a company's financial data from month to month when analyzing a company's performance and make business decisions. Having the entire picture reflected in your financial records is crucial, so make sure to be consistent and rigid about the process, which will help you with decision-making.

Next Section:
4. Financial Analysis