How to Close Your Books Each Month – A Startup Founder’s Checklist

Thinking Ledger
Jul 10
3 min read

Monthly close might sound like a chore, but it’s one of the most important rituals for financial clarity. Without it, your runway estimate might be wrong, your investor updates might be off, and your next big decision might be based on outdated data.

This guide breaks it down into a step-by-step checklist for startup founders — even if you're not an accountant.

Why Monthly Close Matters

● Gives you a real-time view of performance

● Avoids year-end chaos during tax season

● Keeps investor reports clean and on time

● Helps you track burn rate, runway, and KPIs

● Catches small issues before they become big problems

Monthly Close Checklist

Here’s a structured checklist, broken into categories.

Bank and Credit Card Reconciliations

Goal: Ensure your accounting software matches your actual bank accounts.

Reconcile all bank accounts
Match all credit card transactions
Investigate any unmatched entries or timing differences

Use your bank feed sync in QuickBooks/Xero, but verify manually.

Record All Invoices and Customer Payments

Goal: Make sure you’ve logged all your income, even if unpaid.

Review all unpaid invoices (Accounts Receivable)
Match received payments to customer invoices
Write off uncollectible invoices, if needed
Double-check revenue cutoff dates (important for accrual accounting)

Pro Tip: Use invoice aging reports to follow up with overdue clients.

3. Log All Bills and Vendor Payments

Goal: Accurately reflect what you owe and what you’ve paid.

Enter all vendor bills (Accounts Payable)
Match payments with bills
Check for recurring expenses (like software, rent, payroll)
Include any unpaid bills for accrual accuracy

Example: You receive a $2,000 invoice from your contractor on April 28 but pay it May 5 — you still record it in April.

4. Categorize All Transactions

Goal: Ensure all entries are in the correct chart of accounts.

Categorize all bank and card transactions
Split entries where applicable (e.g., partial refunds, shared expenses)
Apply proper account codes for each line item
Review uncategorized or suspense entries

Tip: If unsure, set rules in your software to automate recurring categories (e.g., Stripe fees → “Payment Processing Fees”).

5. Review Revenue and Expense Trends

Goal: Spot irregularities and understand what changed.

Compare revenue vs. prior month
Compare expenses vs. prior month
Investigate large fluctuations
Separate recurring vs. one-time expenses

Visual aid:

Month-over-Month Expense Chart

----------------------------------

Jan $12,000

Feb $14,500

Mar $19,200 ← New hires + paid ads

Apr $14,300

6. Update Key Financial Reports

Goal: Get a clean snapshot of your startup’s health.

Generate Profit & Loss Statement
Generate Balance Sheet
Generate Cash Flow Report
Review burn rate and cash runway
Share summary with internal stakeholders

Pro Tip: Add visuals (bar charts, trends) to simplify internal reporting.

7. Record Payroll and Related Liabilities

Goal: Accurately reflect payroll and taxes.

Post total payroll expense for the month
Include employer taxes and benefits
Record unpaid payroll liabilities if processed after month-end
Reconcile with your payroll provider (e.g., Gusto, ADP)

8. Make Adjusting Journal Entries

Goal: Ensure GAAP-compliant reporting (if applicable).

Accrue revenue and expenses
Book depreciation and amortization
Adjust prepaid expenses
Record loan interest
Apply inventory or COGS adjustments (if applicable)

Relevant ASC guidance: ASC 606 for revenue recognition; ASC 840/842 for leases.

9. Conduct a Quick Financial Review

Before calling it a wrap:

Scan for negative balances in assets or liabilities
Review any large “Uncategorized” balances
Check that Balance Sheet actually balances
Confirm Net Income matches across reports

Optional Illustration: Monthly Close Summary Diagram

┌─────────────┐

│ Bank Recs │

└─────┬───────┘

↓

┌────────────────────┐

│ Invoices & Payments│

└───────┬────────────┘

↓

┌────────────────────┐

│ Expenses & Vendors │

└───────┬────────────┘

↓

┌────────────────────┐

│ Categorize Entries │

└───────┬────────────┘

↓

┌────────────────────┐

│ Adjusting Entries │

└───────┬────────────┘

↓

┌────────────────────┐

│ Final Reports │

└────────────────────┘

Bonus Tips

● Use a recurring checklist tool (like Notion, ClickUp, or Excel)

● Automate data pulling using tools like Fathom or Syft

● Schedule it: Block 1-2 days each month for the close process

Final Word

You don’t need to be a CPA to run a clean monthly close — just a bit of consistency and attention to detail. Over time, this ritual will give you more control, confidence, and cleaner books when investors, VCs, or tax agencies come knocking.