Feb 11, 2021

Closing the Books: The Month End Close Checklist

Closing the Books: The Month End Close Checklist

It’s December. You need to double-check your profit from October, so you run the P&L. But something isn’t right. Curious, you dig up an old October P&L to compare. Sure enough, the profit number changed! Sound familiar? If so, it might be time to adopt a month-end close checklist.

What Is a Month-End Close Checklist?

The month-end close checklist is a financial and operational review of your performance throughout the month. Ideally, some items on your checklist are related to your financial accounting system (such as Quickbooks) and some will be related to your management system (like Fullbay). You want to close out a month so that you have a solid record of what happened during that month, with no chance of numbers moving around or shifting after the fact. That way, when you pull a P&L, you know it’s correct.

Why Do You Need a Month-End Close Checklist?

Your month-end close keeps you consistent and accountable, but there’s more to it than that; it reflects your goals and your progress. It also ensures that critical balances, like cash and inventory, are accurate from month to month.

But the month-end close checklist doesn’t just keep your financial records honest. This is where you look back on everything you’ve done over the last few weeks and figure out: Was it worth it?

When you commit to a month-end close checklist, you’re forcing yourself to take stock of your workload, your efficiencies, and your shortcomings. Measuring things across time periods makes it easy to see how you’re performing. That’s where your goals come in. Do you want to earn $50,000 in a month? How short are you in December? What areas can you improve in to get closer to that goal?

Our society tends to celebrate making a big splash. Million-dollar debuts and overnight successes make the front page of the papers (and social media networks) all the time. The reality is most success comes over time by consistently doing simple processes over and over again. You’ll figure out what is working and what isn’t.

The month-end close checklist will help you do it.

For the purposes of this article, we’ve included a very basic month-end close checklist that you can create with just about any accounting system. It’s not fancy; it’s just a list of things to complete before you call a month “done.”

10-Step Month-End Close Checklist

Within a few days of month end, do the following:

  1. Enter all vendor bills: Make sure all vendor bills for the month are entered in QuickBooks or similar accounting software. (If you’re still tracking this on paper, you need to shift to software right away. You won’t believe how many hours you’ll get back.)
  2. Reconcile vendor statements: Reconcile each vendor’s statement to the corresponding accounts payable balance in your accounting software.
  3. Enter all customer invoices: Make sure all customer invoices for the month are in your accounting software.
  4. Enter all customer payments: Make sure all customer payments for the month are in. This will help you to see which customers you still need to chase down to pay for the work you have completed. You will also begin to see if any of your customers are consistently late in paying you or if you need to make changes to your collection terms.
  5. Reconcile bank accounts: Reconcile all bank accounts (including credit card, checking, and savings accounts) in your accounting software. Cash is the lifeblood of your shop and you need to make sure you have the amount that you think you have.
  6. Reconcile inventory: Reconcile your inventory asset account between your accounting system and your inventory system (e.g. Fullbay).
  7. Other reconciliations: Reconcile any other asset or liability accounts you are tracking outside your accounting system (e.g. Prepaid expenses, Accrued expenses, Deferred rent, etc.).
  8. Run financials: Run your financial statements: Profit and Loss statement, Balance Sheet, and Statement of Cash Flows (if you are using accrual accounting); and any other reports for the period. Verify that the numbers appear reasonable (including trends, balances, and so forth). Make any changes as necessary. If you have a financial plan for the year, compare your results to your plan (if you need a sample plan, you can get one here). This will help you get an idea of where you are on track or need to make some improvements.
  9. Close the period: Close the period in your accounting software. Do not skip this step. It means no more transactions (like vendor bills, customer invoices, etc.) can accidentally be posted to the closed period without at least some sort of warning. In QuickBooks, you can choose to even require a password before anything is entered into a closed period.
  10. Distribute financials: Distribute the financial statements.

If you’re using QuickBooks, here’s how you can use the software to close out a time period (whether it’s a week, a month, or a year). And as a reminder, if you are using Fullbay, things like vendor bills, customer payments, and invoices are automatically sent to QuickBooks so you don’t have to do it manually.

What Should You Include on a Repair Shop’s Month-End Close Checklist?

In the section above we described what a basic month-end close checklist looks like. You can apply that list to just about any type of business, making modifications for your industry as you go.

But a commercial repair shop should take time to make sure the following are considered:

  • How many hours did you invoice?
  • How many hours did you actually clock?
  • What was our efficiency?
  • What was our utilization?
  • How many hours did we get from PM work?
  • How many hours did we get from phone calls/walk-ins?
  • And so on

You want to know what the source of your business is for each month. As you begin to track this information, you can see trends – and you can capitalize on those trends to turn them into opportunities.

For example, maybe you have a miniscule amount of work related to PMs because you haven’t talked to your customers about it. It’s a potential revenue stream you simply haven’t taken advantage of yet. Fortunately, that’s something you can correct.

Why Should You Use a Month-End Checklist?

You are unfortunately not Superman and cannot see through all your finances and management with X-ray vision. Checklists help us humans remember things we might otherwise skip or forget. They ensure consistency and quality and give you peace of mind when moving on to a new month.

The reality, though, is that many shops are not using a month-end close checklist or anything close to it. Most shop owners haven’t heard of it or they think they’re just too busy to sit down and look at the numbers. The reality is, once you start performing this check, it becomes an easy (and non-time-consuming!) way to check on your shop at the end of each month.

Consider this: while many shops aren’t using a month-end close checklist, the best, most successful shops definitely are. And they aren’t just tidying up the books at the end of the month, either. They’re often running through these checklists each week and then creating a final report at the end of the month. This leaves you with an up-close look at exactly what’s happening in your shop on a weekly basis. It’s an even better look at what you’re doing right and where you can improve.

Fullbay Can Help

The month-end close checklist can keep you honest and show you where you can improve your operations. But keeping track of all that information can be tough, even if you love your spreadsheets.

We designed Fullbay to dig into the types of metrics you need to review to dig into your shop’s financials and performance when you close out each month. You can see exactly where work is coming in and where it’s lagging. You can see which of your techs is incredibly efficient, and which might need some extra help to perform the way you know they can.

If you’re ready to learn more, contact us for a free demo. We can’t wait to show you what we can do.


Jacob Findlay