financial-close-checklist

# Financial Close Checklist Skill Structured, repeatable month-end and quarter-end close for accounting teams. This skill guides Sam Ledger through generating close checklists, tracking task status, flagging exceptions, and producing close summary reports for controllers, CFOs, and auditors. --- ## When to Use This Skill **Trigger phrases:** - "Run month-end close" - "Generate the close checklist for [month]" - "What's left in the close?" - "We need to close the books by Friday" - "Tie out our AR sub-ledger" - "Quarter-end close procedures" - "Accelerate our close process" - "How do I run a fast close?" - "Close summary for the board" **NOT for:** - Entering journal entries or transactions — use `qbo-automation` for live QBO writes - Tax return preparation — use `tax-deadline-calendar` and engage CPA - Payroll runs — separate payroll workflow, not a close step - External audit fieldwork — close procedures feed audit prep, not replace it - Real-time dashboards — use `kpi-alert-system` for live monitoring --- ## The Standard Close Checklist ### PHASE 1: Transaction Cutoff (Days 1–2) These steps ensure all activity belongs in the correct period. ``` □ 1.1 Post all cash receipts through last day of month □ 1.2 Record all vendor bills/invoices received through month-end □ 1.3 Confirm credit card transactions downloaded and coded □ 1.4 Post payroll through final pay date in period □ 1.5 Record any wire transfers or ACH payments initiated in period □ 1.6 Confirm sales/revenue recognition cutoff (invoiced vs. shipped) □ 1.7 Identify any transactions in wrong period → post correcting entries ``` ### PHASE 2: Sub-Ledger Reconciliations (Days 2–3) Each sub-ledger must tie to the GL before proceeding. #### 2a. Accounts Receivable ``` □ 2.1 Run AR aging report □ 2.2 Confirm AR sub-ledger total = GL AR balance □ 2.3 Identify invoices > 90 days → flag for collections or bad debt reserve □ 2.4 Post bad debt expense if reserve adjustment needed □ 2.5 Clear any unapplied customer payments □ 2.6 Confirm deferred revenue balance for advance payments ``` **AR Tie-Out Formula:** ``` GL AR Balance = Sub-Ledger Total If difference > $0: investigate open credits, unapplied payments, timing entries ``` #### 2b. Accounts Payable ``` □ 2.7 Run AP aging report □ 2.8 Confirm AP sub-ledger total = GL AP balance □ 2.9 Review bills due within 10 days → schedule payments □ 2.10 Identify duplicate bills or credits not applied □ 2.11 Accrue for invoices received but not yet entered (goods/services received) ``` #### 2c. Bank Reconciliation ``` □ 2.12 Download bank statement through month-end □ 2.13 Reconcile book balance to bank statement balance □ 2.14 List outstanding checks (issued, not cleared) □ 2.15 List deposits in transit (posted in books, not cleared bank) □ 2.16 Identify bank fees and post to GL □ 2.17 Confirm reconciled balance = GL Cash balance ``` **Bank Rec Formula:** ``` Bank Statement Balance + Deposits in Transit - Outstanding Checks = Adjusted Bank Balance Must equal: GL Cash Balance + Any timing JEs = Adjusted Book Balance ``` ### PHASE 3: Accruals & Adjusting Entries (Day 3–4) These are estimates for expenses incurred but not yet billed. ``` □ 3.1 Accrue payroll for days worked but not yet paid □ 3.2 Accrue employer payroll taxes on accrued payroll □ 3.3 Accrue any known vendor invoices not yet received □ 3.4 Accrue interest expense on outstanding debt □ 3.5 Record prepaid expense amortization (insurance, rent, subscriptions) □ 3.6 Record deferred revenue recognition (earned portion of advance payments) □ 3.7 Post depreciation/amortization for fixed assets and intangibles □ 3.8 Record any inventory adjustments (if applicable) □ 3.9 Post reclassifying entries for misposted transactions ``` #### Prepaid Amortization Tracker ``` Asset | Total Cost | Start Date | Months | Monthly Amort | Remaining ----------------|------------|-------------|--------|---------------|---------- D&O Insurance | $24,000 | Jan 1, 2026 | 12 | $2,000 | $18,000 AWS Annual Plan | $6,000 | Mar 1, 2026 | 12 | $500 | $5,500 Office Lease | $3,600 | Jan 1, 2026 | 12 | $300 | $2,700 ``` #### Depreciation Schedule ``` Asset | Cost | Useful Life | Method | Monthly Depr | Accum Depr ----------------|---------|-------------|-----------|--------------|------------ MacBook Pro x3 | $9,000 | 3 years | Straight | $250 | $1,500 Server Rack | $15,000 | 5 years | Straight | $250 | $750 ``` ### PHASE 4: Financial Statement Review (Day 4–5) ``` □ 4.1 Generate Trial Balance — review for unusual balances □ 4.2 Compare P&L to prior month (flag >15% variance in any line item) □ 4.3 Compare P&L to budget/forecast — document significant variances □ 4.4 Verify Balance Sheet balances (Assets = Liabilities + Equity) □ 4.5 Review Cash Flow Statement — confirm net change ties to cash account movement □ 4.6 Confirm all intercompany eliminations (if multi-entity) □ 4.7 Review equity rollforward (beginning + net income - distributions = ending) □ 4.8 Confirm no accounts with unexpected zero or negative balances ``` #### Variance Analysis Template ``` Account | Prior Month | Current Month | $ Change | % Change | Explanation -----------------|-------------|---------------|----------|----------|------------- Revenue | $85,000 | $92,000 | +$7,000 | +8.2% | New client X Payroll | $42,000 | $48,000 | +$6,000 | +14.3% | New hire Mar 1 Software Subs | $3,200 | $5,100 | +$1,900 | +59.4% | ← INVESTIGATE ``` ### PHASE 5: Close Lock & Sign-Off (Day 5) ``` □ 5.1 Lock period in accounting system (prevent backdating) □ 5.2 Export final Trial Balance, P&L, Balance Sheet, Cash Flow □ 5.3 Save to close folder: /close/YYYY-MM/ □ 5.4 Obtain controller/CFO sign-off □ 5.5 Distribute financial package to stakeholders □ 5.6 Log close completion date and duration for process improvement tracking □ 5.7 Note any open items / carryforward items for next month ``` --- ## Close Templates by Entity Type ### Small Business / SMB (5-day close target) ``` Day 1: Transaction cutoff, download bank statements Day 2: Bank rec, AR/AP sub-ledger tie-out Day 3: Accruals, prepaid amortization, depreciation Day 4: Trial balance review, variance analysis Day 5: FS review, lock period, distribute package ``` ### Startup / SaaS Company (3-day fast close) ``` Day 1 AM: Transaction cutoff + bank rec Day 1 PM: AR/AP tie-out + deferred revenue schedule Day 2 AM: Accruals + stock comp expense entry Day 2 PM: Trial balance + P&L vs. budget variance Day 3: FS review + board package prep + lock ``` ### Accounting Firm / Client Close (day-of close) ``` Hour 1: Pull all source data (bank, payroll, CC) Hour 2: Post entries, run bank rec Hour 3: Accrue + amortize + depreciate Hour 4: Review FS, document exceptions Hour 5: Deliver client package, lock period ``` --- ## Quarter-End Additional Steps In addition to all monthly steps: ``` □ Q1 Reconcile all balance sheet accounts (not just AR/AP/Cash) □ Q2 Review equity accounts — capital contributions, distributions, retained earnings □ Q3 Compute estimated income tax provision (if C-Corp or S-Corp with tax) □ Q4 Review fixed asset register — any disposals, fully depreciated assets? □ Q5 Confirm loan balances match amortization schedules □ Q6 Review contingent liabilities (pending lawsuits, commitments) □ Q7 Prepare quarter-end management report (P&L + BS + Cash Flow + KPIs) □ Q8 Deliver to board/investors within 15 days of quarter-end ``` ### Year-End Additional Steps ``` □ Y1 All quarterly steps above □ Y2 Issue 1099-NECs by January 31 (contractors paid ≥ $600) □ Y3 Reconcile payroll W-2s to payroll tax returns (940, 941) □ Y4 Inventory count and valuation (if applicable) □ Y5 Goodwill and intangible asset impairment review □ Y6 Related-party transaction disclosure documentation □ Y7 Engage CPA for tax return preparation □ Y8 Prepare audit support package (if audited) ``` --- ## Exception Handling Protocols ### When AR Sub-Ledger Doesn't Tie to GL ``` Step 1: Run AR aging with open invoice detail Step 2: Compare sub-ledger total to GL AR account balance Step 3: If difference found: a. Check for unposted transactions in AR module b. Look for manual JEs directly to AR GL account (bypassing sub-ledger) c. Check for duplicate customer payments not applied d. Review void/deleted transactions in prior periods Step 4: Post reconciling JE with clear memo explaining difference Step 5: Document root cause to prevent recurrence ``` ### When Bank Rec Won't Balance ``` Step 1: Confirm bank statement ending date matches close date Step 2: List ALL outstanding checks — verify against prior month's list Step 3: List ALL deposits in transit — confirm cleared in subsequent statement Step 4: Look for duplicate transactions in GL Step 5: Check for NSF checks posted by bank but not recorded in books Step 6: Verify no automatic bank charges missed (wire fees, service charges) ``` ### Large Unexplained Variance (>15% MoM) ``` Trigger: Any P&L line item with >15% month-over-month change without explanation Action: 1. Pull transaction detail for that GL account 2. Identify the specific transaction(s) driving the variance 3. Confirm correct coding (not misposted from another account) 4. If legitimate: document business reason in variance memo 5. If error: post correcting JE before close ``` --- ## Close Summary Report Format Produce this report after each close: ``` MONTH-END CLOSE SUMMARY Period: [Month YYYY] Close Completed: [Date] Prepared By: [Name] Reviewed By: [Name] FINANCIALS AT A GLANCE Revenue: $XX,XXX (vs. prior month: +/-X%) Gross Profit: $XX,XXX (Gross Margin: XX%) Net Income: $XX,XXX Cash Balance: $XX,XXX AR Balance: $XX,XXX (Avg DSO: XX days) AP Balance: $XX,XXX CLOSE STATUS ✅ Bank reconciliation — completed [date] ✅ AR sub-ledger tie-out — completed [date] ✅ AP sub-ledger tie-out — completed [date] ✅ Accruals posted — [# of entries] ✅ Depreciation/amortization posted ✅ Period locked in [system] ⚠️ OPEN ITEMS (carry forward): - [Item 1]: awaiting [input/resolution] - [Item 2]: to be resolved by [date] KEY VARIANCES EXPLAINED [Account]: [$ change] [% change] — [brief explanation] ATTACHMENTS □ Trial Balance □ P&L Statement □ Balance Sheet □ Cash Flow Statement □ Bank Reconciliation □ AR Aging □ AP Aging ``` --- ## Close Duration Benchmarks | Company Stage | Target Close Duration | Best Practice | |---|---|---| | Startup (< $1M ARR) | Same day | Automated bank feeds, cloud accounting | | SMB ($1M–$10M) | 3–5 business days | Dedicated bookkeeper, clear cutoffs | | Mid-market ($10M–$100M) | 5–7 business days | ERP system, close calendar | | Enterprise ($100M+) | 10–15 business days | Dedicated close team, automated consolidation | | **Target (any)** | **Reduce by 30% YoY** | **Process automation + checklist discipline** | --- ## Accelerating the Close: Quick Wins ``` 1. Automate bank feeds — eliminate manual download/import 2. Set transaction cutoff rules — no backdating without approval 3. Standardize chart of accounts — fewer coding questions = faster entry 4. Create recurring JE templates — one-click accruals, depreciation, amortization 5. Use close management software — FloQast, Blackline, or a simple Google Sheet tracker 6. Pre-schedule close calls — 15-min daily standup during close week 7. Designate a close owner — one person accountable for the checklist 8. Post-close retrospective — 15 min after each close to capture what slowed you down ``` --- ## Integration Points - **`qbo-automation`** — pull actuals from QuickBooks; post accruals and JEs programmatically - **`budget-vs-actual`** — compare close results against plan; generate variance commentary - **`ar-collections-agent`** — escalate high-risk AR items identified in close aging review - **`kpi-alert-system`** — set alerts on close metrics (DSO, DPO, cash balance thresholds) - **`report-generator`** — format close summary into client-ready PDF or board deck - **`thirteen-week-cash-flow`** — feed actual month-end cash balance as input to 13-week forecast - **`tax-deadline-calendar`** — trigger quarterly estimated tax tasks from close data --- ## Example Usage **User:** "It's March 31st — help me close February's books for a client. They're on QBO, about $180k/month revenue, 8 employees." **Sam's response:** ``` Close Checklist — February 2026 Client: [Name] | System: QuickBooks Online | Revenue: ~$180k/mo PHASE 1 — Transaction Cutoff (Today) □ Confirm all customer payments through Feb 28 posted □ Enter any bills received in February not yet in QBO □ Download and match credit card transactions through Feb 28 □ Confirm payroll for Feb 1–28 pay dates is posted PHASE 2 — Sub-Ledger Reconciliations (Today) □ Run AR aging in QBO → does it match GL 1200 balance? □ Run AP aging → does it match GL 2000 balance? □ Download bank statement → run bank reconciliation PHASE 3 — Accruals (Today/Tomorrow) □ Accrue Feb 27-28 payroll (2 days unpaid) □ Amortize prepaid expenses (pull your prepaid schedule) □ Post February depreciation PHASE 4 — Review (Tomorrow) □ Compare Feb P&L to January — flag any line >15% change □ Confirm Balance Sheet balances □ Review cash balance vs. bank rec PHASE 5 — Lock & Deliver □ Lock February period in QBO □ Export TB, P&L, BS, Cash Flow □ Prepare close summary → send to client Estimated time: 4-6 hours for clean books. Want me to start with the bank rec or the AR aging tie-out? ``` --- ## Reference: Close Calendar Template ``` MONTH-END CLOSE CALENDAR Day 1 (Month + 1): Bank statement available → begin bank rec Day 2: AR/AP tie-out, post accruals Day 3: Depreciation, prepaid amortization Day 4: TB review, variance analysis, adjusting entries Day 5: FS review, controller sign-off, lock period Day 6: Distribute financial package Day 7–10: Client meeting / board presentation (if applicable) QUARTERLY EXTRAS (end of Q1/Q2/Q3/Q4): +Day 5–6: Full BS reconciliation, tax provision +Day 7: Board/investor package +Day 10: Quarterly filings (941, sales tax, etc.) ```