Bookkeeping is much easier when it is handled consistently.
Waiting until tax season—or until you suddenly need a financial statement—can mean spending hours trying to reconstruct months of financial activity.
A simple monthly bookkeeping process can help prevent that.
Use the following checklist as a general framework for reviewing your books each month.
Record and Categorize Financial Activity
Start by making sure transactions from your bank accounts and business credit cards have been recorded.
Review transactions that your accounting software cannot clearly identify and make sure activity is categorized consistently.
Bank feeds and automated rules can save time, but imported transactions should still be reviewed.
Reconcile Bank Accounts
Compare the activity in each bank account with the corresponding bank statement.
Reconciliation helps identify missing transactions, incorrect entries, duplicates, and other discrepancies.
If the balances don't reconcile, investigate the difference rather than simply adjusting the books until they match.
Reconcile Credit Cards
Business credit cards should be reconciled just like bank accounts.
Confirm that purchases, credits, fees, and payments have been properly recorded.
Review Accounts Receivable
Look at outstanding customer balances.
Which invoices are current? Which are past due? Are there older balances that need to be investigated or followed up on?
Consistent review helps prevent receivables from disappearing into the background.
Review Accounts Payable
Review bills and upcoming obligations.
Make sure vendor balances recorded in the accounting system accurately reflect what the business owes.
Knowing what needs to be paid can also help with short-term cash planning.
Review Payroll Activity
If your business has employees, review the payroll-related activity posted to the books.
Make sure wages, payroll taxes, benefits, and other relevant entries have been recorded appropriately.
Look for Unusual Transactions
Scan the month's activity for anything that looks unexpected.
Duplicate charges, unusually large expenses, unfamiliar vendors, or strange account balances are easier to investigate while the activity is still recent.
Review the Profit and Loss Statement
Don't simply look at net income and move on.
Compare revenue and expenses with previous periods.
Ask questions: Are sales trending up or down? Did a particular expense increase significantly? Is profitability changing? Do the numbers generally match what you know happened in the business?
Review the Balance Sheet
The Balance Sheet can identify issues that may not be obvious from the Profit and Loss Statement.
Review major cash, receivable, payable, credit card, loan, and other balance-sheet accounts.
If a balance looks unusual, investigate it.
Organize Supporting Documentation
Maintain an organized process for invoices, receipts, bank statements, and other supporting documentation.
A consistent digital filing system can make information much easier to locate when questions arise later.
Resolve Questions Before Moving On
Don't allow unresolved items to accumulate indefinitely.
A few unanswered transactions every month can eventually become a significant cleanup project.
Address questions while the activity is still fresh.
A Good Monthly Process Doesn't Need to Be Complicated
The most important characteristic of a bookkeeping process isn't complexity.
It's consistency.
Keeping the books current each month can provide more useful financial information throughout the year and reduce the amount of work needed at year-end.