1. Confirm that the source data is complete

Start by identifying every place money or inventory moved during the month: storefronts, marketplaces, payment processors, banks, credit cards, financing providers, payroll systems, and warehouses. A close cannot be reliable if one active source is missing, even when the accounts that are present reconcile perfectly.

Record the coverage period and latest synchronization date for each source. For uploaded statements, confirm that every page is present and that the opening balance agrees with the prior month's closing balance. For API connections, investigate authorization failures, delayed feeds, and disconnected accounts before reviewing totals.

Completion test: the source register lists every active account and channel, the full month is present, and no unexplained gap exists between periods.

2. Reconcile cash, cards, and commerce clearing

Reconcile each bank and credit card account to its statement ending balance. Outstanding items should be real timing differences, not a growing collection of unidentified entries. Transfers between business accounts should match both sides and should not affect profit.

Then reconcile commerce activity to payouts. Gross sales, discounts, returns, fees, taxes, reserves, and unsettled funds need separate treatment. A payout that matches the bank is only one part of the control; the activity inside the payout must also agree to the channel data.

Review payment processor clearing balances at month-end. A balance can be reasonable when orders have been earned but not yet deposited. It becomes a warning sign when it is old, moves in the wrong direction, or cannot be tied to specific unsettled activity.

3. Check cutoff and classification

Cutoff asks whether transactions belong in this month or another one. Inspect sales and refunds near month-end, inventory receipts in transit, bills received after closing, payroll periods that cross months, and large deposits recorded just before or after the period boundary.

Classification asks what each transaction represents. Review new vendors, unusually large expenses, owner payments, loan activity, tax payments, transfers, and items posted to suspense or miscellaneous accounts. Recurring rules save time, but they should never turn an uncertain item into a confident answer without evidence.

Items that often need a human decision

  • personal or owner activity mixed into a business account;
  • payments that combine principal, interest, and fees;
  • software, equipment, or prepaid services that may need capitalization or deferral;
  • foreign currency settlements and processor conversion fees;
  • chargebacks, reserves, and marketplace adjustments with unclear source detail.

4. Roll inventory and COGS forward

Inventory purchases do not automatically equal cost of goods sold. Reconcile opening inventory plus purchases and other capitalized costs, less COGS and adjustments, to closing inventory. The method should match the business's accounting policy and available operational data.

Investigate negative inventory, missing unit costs, duplicate SKUs, large manual adjustments, and products sold before a cost is assigned. If landed costs such as freight and duties are capitalized, apply them consistently and retain the calculation.

5. Review the financial statements together

A P&L can look reasonable while the balance sheet contains serious errors. Review both, along with cash flow and supporting reconciliations. Compare results with the prior month, the same period last year when available, and operational expectations.

Ask why gross margin changed, why cash moved differently from profit, whether sales tax liabilities are plausible, whether receivables and payables are aging, and whether any account balance lacks a clear economic meaning. Material changes should have an explanation supported by transactions, not only a comment that the number fluctuated.

Finally, document open questions, who owns them, and whether they prevent close. Lock or mark the month complete only after required approvals. A later adjustment should be traceable to the person, reason, evidence, and affected period.

What a closed month should leave behind

  1. Reconciliations tied to source statements and platform reports.
  2. A list of reviewed exceptions and their resolution.
  3. Approved journal entries with supporting evidence.
  4. Financial statements that agree to the underlying ledger.
  5. A concise review record showing who prepared and approved the month.

This article is general information, not accounting, tax, or legal advice for a specific business. Treatment can vary by jurisdiction, accounting method, contract terms, and facts. Consult a qualified professional about your circumstances.