Collect evidence before classifying transactions
Gather bank, card, loan, and payment processor statements for the same period. Export the transaction detail, not just the ending balances. Match deposits to invoices or sales records and attach receipts to purchases. Keep owner contributions, transfers, borrowed money, and customer revenue distinct. A bank deposit alone does not explain why the money arrived.
Reconcile, then investigate exceptions
Compare the accounting balance with each statement and list outstanding items. Investigate duplicate imports, unmatched transfers, refunds, processor fees, and checks that have not cleared. Review uncategorized spending while the purchase is still memorable. Ask the owner for the business purpose and preserve the answer with the transaction. Avoid forcing a difference into miscellaneous expenses just to make the reconciliation finish.
Close with decisions, not just reports
Review the income statement alongside the balance sheet and a cash summary. Note unusual margins, overdue invoices, unpaid bills, and movements in owner accounts. Save a dated close package and a separate list of unresolved questions. For example, a deposit for future work may require a discussion about the accounting method rather than an assumption based on cash received.
- Reconcile every active financial account to its statement.
- Resolve missing receipts and document personal items separately.
- Review loans, payroll balances, and payment processor clearing accounts.
- Record who reviewed the close and what remains unresolved.
Questions to consider
Can a spreadsheet be enough?
A suitable system can be simple if it clearly records income and expenses and preserves supporting evidence. Complexity, transaction volume, inventory, and payroll may make accounting software more practical.
When should the month be closed?
Choose a realistic internal target after all statements arrive. Consistency and a documented exception list matter more than rushing to a date with unexplained balances.
Official sources and further reading
Use this guide to prepare questions and organize records. It does not determine eligibility, establish a professional engagement or guarantee a tax or business outcome.