Month-End Close Checklist for Small Businesses
A 14-step month-end close for UK small businesses: bank, card and Stripe reconciliation, VAT, PAYE, the director's loan account, and a five-day timetable.
Mathias Popp
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In short
A month-end close reconciles every bank, card and payment processor account, posts the missing bills and accruals, and locks the month so the P&L and balance sheet stop changing.
A small business can close in three to five working days if the bank is reconciled during the month. A close that starts from a pile of unmatched transactions takes weeks.
The checklist below has 14 steps in four blocks: bank and cash, sales and purchases, balance sheet accounts, and review. Each step says what "done" looks like.
The UK-specific steps are the VAT control account, PAYE, which is due to HMRC by the 22nd of the following month, and the director's loan account, where money still owed nine months after the year-end costs the company Corporation Tax at 33.75%.
What a month-end close is
A month-end close is the set of tasks that finish a month's bookkeeping so that the profit and loss statement and balance sheet for that month are complete and will not change. It ends with a locked period: nothing more gets posted to that month unless someone decides to reopen it.
The close matters because every report you read is only as good as the last close behind it. A cash figure on a dashboard means little if half of last month's card transactions are still unmatched. Tax returns, management accounts, board packs and loan applications all sit on closed months.
A business with one or two bank accounts, a card feed and a payment processor should aim for three to five working days. The sooner the close finishes, the sooner the numbers can be used.
Before month-end: the work that decides how long the close takes
Most of a slow close was created during the month. Three habits shorten it more than anything on the checklist itself.
Reconcile the bank every week. Matching 30 transactions takes minutes; matching 400 takes an afternoon and produces mistakes.
Attach receipts as they arrive. Chasing a supplier invoice from six weeks ago is a common reason a close stalls. Photograph it the day it lands.
Send invoices on the day the work is done. Revenue that is invoiced late lands in the wrong month and has to be moved back.
The month-end close checklist
Work through the blocks in order. Each item says what finished looks like, because "reconcile the bank" is not done until the difference is zero and every open item has a name.
Block 1: bank, cash and payment processors
1. Reconcile every bank account to the statement. Done when the ledger balance equals the statement balance at the last day of the month, with no unexplained differences.
2. Reconcile credit cards and expense cards. Same test. Card statements that cut off mid-month need the transactions after the cut-off matched separately.
3. Reconcile payment processors and marketplaces. Stripe, PayPal, Shopify Payments, Amazon and GoCardless pay out net of fees and refunds. Done when gross sales, fees, refunds and the payout each sit in their own account and the processor's balance at month-end matches the ledger.
4. Count petty cash and the till, if you have them. Post the difference, however small, so it does not carry forward.
Block 2: sales and purchases
5. Raise every invoice for work done or goods shipped in the month. Done when there is no delivered order or completed job without an invoice dated in the month.
6. Review the aged debtors report. Chase anything over its terms, and write down any invoice you no longer expect to collect. Done when every open invoice has an expected payment date.
7. Enter every supplier bill dated in the month, including the ones not yet paid. Done when the aged creditors report matches the pile of bills, and nothing is sitting in an inbox.
8. Post accruals for costs incurred without a bill yet, such as a contractor who has not invoiced, and prepayments for costs paid in advance, such as annual insurance or software.
Block 3: balance sheet accounts
9. Reconcile the VAT control account. The balance should equal the VAT owed or reclaimable for the periods HMRC has not yet been paid for. Once a period is paid, its balance should be zero. This is where UK books most often go wrong.
10. Reconcile payroll. Net pay, PAYE and National Insurance, and pension contributions posted in the month should agree to the payroll reports, and the PAYE liability should equal what is due to HMRC. It is due by the 22nd of the following month if you pay electronically.
11. Reconcile the director's loan account. Every personal payment from the business account and every business cost paid personally should be posted. If you owe the company money nine months after its year-end, the company pays Corporation Tax of 33.75% on the amount, and a loan over £10,000 can be a taxable benefit. Know the balance every month.
12. Post depreciation and check fixed assets. New equipment in the asset register, disposals removed, and the monthly depreciation charge posted.
13. Reconcile loans and financing. The loan balance should match the lender's statement, with the interest split from the capital repayment.
Block 4: review and lock
14. Run the trial balance and read the P&L and balance sheet against last month. Every line that moved more than you expect gets a one-line explanation. Our guide to reading a monthly P&L and balance sheet covers what to look for. Then lock the period.
A close timetable for a small business
This is a realistic timetable for a business that reconciles weekly. Working day 1 is the first working day after month-end.
Working day | Block | Who |
|---|---|---|
Day 1 | Bank, cards and processors (Block 1) | Bookkeeper |
Day 2 | Invoices, bills, accruals (Block 2) | Bookkeeper, with the owner for missing bills |
Day 3 | VAT, payroll, director's loan, assets, loans (Block 3) | Bookkeeper |
Day 4 | Review and lock (Block 4) | Accountant |
Day 5 | Management accounts sent | Accountant |
If the close routinely runs past day 10, the cause is almost always in Block 1: transactions that were not matched during the month. Fix the weekly habit before adding people to the close. If the books are more than a month behind, start with our catch-up bookkeeping guide.
Common mistakes
Closing on unreconciled accounts. A P&L produced while 40 transactions sit in "uncategorised" is a draft.
Treating the processor payout as revenue. A £9,400 Stripe payout might be £10,000 of sales less £300 of fees and £300 of refunds. Recording £9,400 as sales understates revenue and hides the fee line.
Leaving the VAT control account to the quarter. An error found at the VAT return can be three months old, and the receipt behind it is harder to get.
Not locking the period. A transaction posted into last month after the accounts were sent changes numbers people have already acted on.
Where Balance fits
Balance is an AI-powered accounting firm in London and Copenhagen. Its AI agents reconcile, match and chase receipts continuously through the month, so Blocks 1 and 2 are largely done before the month ends. A named ACA-qualified accountant reviews and signs off the books. It works inside your existing Xero, e-conomic or Business Central, for one agreed monthly fee from £350 per entity. Payroll and management accounts are added when you need them. Our guide to AI bookkeeping services explains how that differs from software that suggests matches for you to approve.
If you would rather not do any of this yourself, see what Balance includes or book a call.
FAQ
What is a month-end close?
The routine that completes a month's bookkeeping: reconciling every account, posting missing invoices, bills, accruals and adjustments, producing the P&L and balance sheet, and locking the period so the figures stop changing.
How long should a month-end close take for a small business?
Three to five working days if bank accounts are reconciled during the month. Ten or more days usually means the reconciliation is being done in one batch after month-end.
What is the difference between a month-end close and a year-end close?
The month-end close produces management accounts for the business. The year-end close adds the adjustments for statutory accounts and tax: final depreciation, stock counts and the Corporation Tax provision. A private limited company files accounts with Companies House within nine months of its year-end, pays Corporation Tax within nine months and a day, and files the Corporation Tax return within 12 months.
Do I need to close the books every month if I am a small business?
If you make decisions from your numbers, yes. VAT-registered businesses file quarterly in any case, and a monthly close means each VAT return only confirms figures you have already checked.
Which accounts should be reconciled every month?
Every bank account, every card, every payment processor and marketplace, the VAT control account, PAYE and pensions, the director's loan account, loans, and fixed assets.
What does it mean to lock a period?
Setting a lock date in the accounting software so nothing can be posted to that month or earlier without deliberately reopening it. Xero and Business Central have a lock date setting; e-conomic locks by closed accounting period.
More answers are on our FAQ page.