A month-end close is a short, repeatable routine: get every transaction into the books with its supporting document, reconcile each bank, card and loan account to its statement, settle what customers owe you and what you owe, confirm payroll tax deposits, then review the reports and lock the month so nobody changes it by accident.

Do it in the first week of the new month, once statements are available, and in the same order every time. The table below is the checklist; the sections after it explain each step.

This is a general bookkeeping checklist, not tax or accounting advice. The IRS rules cited were checked on October 9, 2026. Agree on your accounting method, chart of accounts and filing obligations with your accountant or bookkeeper.

The checklist at a glance

Step What to do Done when
1. Capture Enter or import every sale, deposit, bill and expense No uncategorized bank or card transactions
2. Document Attach the receipt, invoice or bill to each entry Every expense has a supporting document
3. Reconcile Match each bank, card and loan account to its statement Balances agree, with outstanding items listed
4. Receivables Review unpaid invoices and follow up Overdue invoices have a next step
5. Payables Enter all bills and schedule payments No bills sitting outside the books
6. Payroll Confirm payroll entries and tax deposits Deposit confirmations saved
7. Clearing Empty processor and holding accounts Zero balance, or each balance explained
8. Review Compare profit and loss and balance sheet to last month Large changes explained
9. Lock Close the period and file the month’s records Period locked; reports saved

1. Get every transaction into the books

Start with the business checking account. The IRS notes that for most small businesses, the business checking account is the main source for entries in the books. Import or enter every deposit and payment, then every credit card transaction, then sales recorded elsewhere, such as your invoicing tool or point-of-sale system.

Categorize each one to your chart of accounts. Anything you can’t identify goes to a single “ask the owner” list rather than a guess.

2. Attach supporting documents

The IRS describes supporting documents as the sales slips, paid bills, invoices, receipts, deposit slips and canceled checks behind each entry, and says to keep them because they support both your books and your tax return. For purchases and expenses, the documents should identify the payee, the amount paid, proof of payment, the date incurred, and a description showing what was bought.

Attach the document to the transaction in your accounting software, or file it in a folder named by year and month. The IRS suggests organizing documents by year and by type of income or expense.

3. Reconcile every bank, card and loan account

For each account, compare the ending balance in your books with the statement. List anything that’s in one but not the other, such as checks not yet cashed or deposits in transit, and fix duplicates or missing entries. A bank feed brings transactions in, but it doesn’t confirm they’re categorized or matched correctly; the reconciliation does. Repeat for credit cards and any loan or line of credit.

4. Review what customers owe you

Run the unpaid invoices report. Send reminders on anything overdue, record payments that arrived outside your invoicing tool, and decide what to do about invoices that look uncollectible with your accountant. If payment collection is a recurring problem, see what to look for in payment processing when sending invoices.

5. Enter and schedule bills

Enter every bill that arrived during the month, even if you won’t pay it yet, so the month’s expenses are complete. Schedule payments by due date. If approvals slow this step, our purchase order approval routing guide covers how to route them.

6. Payroll and payroll tax deposits

Confirm that each payroll run is recorded with its wages, withholding and employer taxes, and that the tax deposits were made on time:

  • Your deposit schedule. Before each calendar year, you must determine whether you’re a monthly or semiweekly depositor, based on the tax you reported during a lookback period.
  • Monthly depositors deposit employment taxes on payments made during a month by the 15th day of the following month.
  • Semiweekly depositors deposit taxes for Wednesday, Thursday or Friday paydays by the following Wednesday, and for Saturday through Tuesday paydays by the following Friday.
  • Deposits are electronic. Federal tax deposits must be made by electronic funds transfer.

If you use a payroll service, save its deposit confirmations with the month’s records. Quarterly, Form 941 is due by the last day of the month after the quarter ends (April 30, July 31, October 31 and January 31), with 10 extra calendar days if every deposit was made on time.

7. Empty clearing and holding accounts

Card processors, online payment tools and “undeposited funds” accounts hold money between the sale and the bank deposit. At month-end, each should be at zero or have a balance you can explain, such as a payout that landed on the 1st. Record processor fees as an expense so sales show the full amount customers paid. For in-person sales, see our POS comparison.

8. Review the reports

Run the profit and loss statement and balance sheet for the month and compare them to the previous month and the same month last year. Look for categories that swung sharply, negative balances that shouldn’t exist, and personal or one-off items in business accounts. Send the reports and your “ask the owner” list to whoever reviews the books.

9. Lock the month and keep the records

Once the reports are reviewed, use your accounting software’s closing date or period lock, if it has one, so later edits to a closed month need a deliberate override. Save the reconciliation reports and statements with the month’s records.

The IRS says to keep records that support an item of income, deduction or credit on a tax return until the period of limitations for that return runs out:

  • 3 years in most cases.
  • 3 years from filing or 2 years from paying the tax, whichever is later, if you file a claim for a credit or refund.
  • 6 years if you don’t report income you should have and it’s more than 25% of the gross income shown on the return.
  • 7 years if you file a claim for a loss from worthless securities or a bad debt deduction.
  • At least 4 years for employment tax records, counted from when the tax is due or paid, whichever is later.

Keep property records until the period of limitations expires for the year you dispose of the property, because they’re needed for depreciation and to figure the gain or loss. The IRS lets you choose any recordkeeping system that clearly shows your income and expenses, and the same requirements apply to electronic records as to paper ones.

Who does what

In a small office, the owner or office manager usually handles steps 1, 2, 4 and 5, and a bookkeeper or accountant handles 3, 7, 8 and 9. Agree on it in writing so nothing falls between the two. Fold the close into your wider monthly office operations checklist, and if you’re choosing the software that runs it, compare plans in our accounting software guide.

Frequently Asked Questions

How long should a small business keep month-end records?

The IRS says to keep records that support your tax return until the period of limitations for that return runs out. That’s generally 3 years, but 6 or 7 years in some situations, and employment tax records should be kept for at least 4 years after the tax is due or paid, whichever is later.

When are payroll taxes due each month?

It depends on your deposit schedule, which you determine before each calendar year from your past tax liability. Monthly depositors deposit employment taxes on a month’s payments by the 15th of the following month; semiweekly depositors deposit within a few days of each payday. Deposits must be made electronically.

Do I need accounting software to close the month?

No. The IRS lets you choose any recordkeeping system that clearly shows your income and expenses, and the same rules apply whether your records are on paper or in software. Software mainly makes importing, matching and reporting faster.

Sources

Checked October 9, 2026.