Accounting & monthly close
A monthly close should explain the results and the movement in cash. We reconcile the records and prepare reporting management can use to understand what changed.
A close should explain the month
An income statement may show a stronger month while the bank balance falls. Customers may be taking longer to pay, inventory may be building or a debt payment may have absorbed cash. Without the explanation, a report can leave the owner with as many questions as before.
We bring the bank and card activity, payroll, receivables, payables and owner transactions into the monthly close. Differences are investigated, corrections are recorded and unresolved questions are identified. The resulting reports should make the financial position easier to discuss, not leave management to reconstruct it.
A profitable quarter can still use cash
Consider an illustrative accrual-basis business reporting $120,000 of quarterly profit. Customers owe it more at quarter-end, inventory has increased, and the business has paid loan principal and made owner distributions.
Under the assumptions below, cash falls by $45,000. That is a change in cash—not the ending bank balance, and not evidence that the quarter made a loss.
| Item | Cash reconciliation amount |
|---|---|
| Reported profit | $120,000 |
| Increase in receivables | −$70,000 |
| Increase in inventory | −$40,000 |
| Loan principal paid | −$25,000 |
| Owner distributions | −$30,000 |
| Change in cash | −$45,000 |
Hypothetical accrual-basis example. Assume no changes in payables or other working-capital balances, no noncash expenses, and no other investing or financing cash flows.
Use the explanation to decide what comes next
Once the accounts are reconciled, management can distinguish a collections issue from a change in margins, or an inventory commitment from ordinary operating spending. That distinction helps focus the next conversation on the part of the business that needs attention.
Where tax or advisory work is included, we can use the current results to update estimates or examine a proposed distribution, hire or expansion. Those questions need their own analysis; they are not answered by the bank balance alone.
A reporting package suited to the organization
We agree the reports, supporting schedules and discussion frequency before recurring work begins. The package can include the income statement and balance sheet, relevant receivable and payable information, owner activity and an explanation of significant changes.
An initial cleanup is distinguished from the ongoing close. We also identify what your bookkeeper, finance staff and payroll provider will continue to handle. A company with capable internal staff may need a narrower accounting or tax role rather than a replacement team.