monthly-close-process

name	monthly-close-process
description	Runs the full month-end close process end-to-end, including revenue recognition, accruals, reconciliations, journal entries, and the financial close checklist. Use when the user mentions month-end close, closing the books, revenue recognition, posting month-end accruals, or asks about running the close checklist.
version	2.0.0
author	Crewm8
maintainer	Gokul (github.com/gokulb20)
license	MIT
homepage	https://crewm8.ai
tags	["cfo","finance","month-end-close","revenue-recognition","accruals","reconciliation"]
related_skills	["financial-statement-generation","audit-preparation","internal-controls-design"]
inputs_required	["general-ledger-trial-balance","bank-and-credit-card-statements","ar-and-ap-subledger-reports","payroll-register","revenue-contracts-and-deferred-revenue-schedule","prepaid-and-fixed-asset-schedules"]
deliverables	["completed-close-checklist","balanced-trial-balance","flux-analysis-with-commentary","revenue-recognition-summary","deferred-revenue-rollforward"]
compatible_agents	["hermes","claude-code","droid","cursor","windsurf","openclaw","openai","generic"]

Monthly Close Process

Run the full month-end close — the disciplined process that turns a month of transactions into reliable financial statements. Handle revenue recognition, accruals, reconciliations, adjustments, and the close checklist. Goal: the books are closed within 5-10 business days of month-end, every month.

Purpose

The month-end close is the heartbeat of financial operations. Without a disciplined, repeatable close process, financial statements are unreliable, decisions are made on stale or wrong data, and audits become nightmares. This skill provides the step-by-step workflow, accrual methodologies, and close checklist needed to produce reliable financials on a predictable schedule every single month.

When to Use

• "Run month-end close"
• "Close the books for [month]"
• "Revenue recognition for the month"
• "Post month-end accruals"
• "Month-end reconciliation checklist"
• "Are we ready to close?"

Inputs Required

• General ledger trial balance as of month-end
• Bank and credit card statements for all accounts
• AR and AP subledger reports
• Payroll register for the month
• Active revenue contracts and deferred revenue schedule
• Prepaid expense and fixed asset schedules
• Prior month's close package for flux comparison

Quick Reference

Close Phase	Days	Key Tasks
Transaction Cutoff & Subledger Close	1-3	Bank rec, AR/AP reconciliation, payroll verification
Revenue Recognition	3-5	Deferred revenue schedule, adjusting entries
Accruals & Adjustments	5-7	Unbilled AP, payroll accrual, prepaids, depreciation, bad debt
Review & Analysis	7-8	Trial balance review, flux analysis, balance sheet tie-out
Statement Preparation	8-10	Hand off to financial-statement-generation

Accrual Type	Calculation	Example
Unbilled AP	Services received, no invoice yet	Legal work done in March, bill in April
Payroll accrual	Days worked but paid next month	(Monthly payroll / working days) × days between pay date and month-end
Prepaid amortization	Total prepaid / months of coverage	12-month policy = 1/12 per month
Depreciation	Asset cost / useful life (months)	Straight-line

Procedure

Day 1-3: Transaction Cutoff & Subledger Close

Task	Owner	Dependency
Stop processing new AP invoices for the month	AP	—
Stop processing new AR invoices for the month	AR	—
Reconcile all bank accounts to GL	Treasury	Bank statements
Reconcile all credit cards to GL	Treasury	Card statements
Reconcile AR subledger to GL	AR	Payments matched
Reconcile AP subledger to GL	AP	Invoices entered
Verify payroll entries match pay stubs	Payroll	Payroll register

Day 3-5: Revenue Recognition

For SaaS businesses, the critical month-end step:

1. Identify all revenue contracts active during the month.
2. Calculate recognized revenue:
   - Subscription: (Total contract value / contract months) × months elapsed this period
   - Usage-based: actual usage × contracted rate
   - Professional services: % of completion or upon delivery
3. Post adjusting entries:
   DR Deferred Revenue, CR Revenue (for amounts earned this period)
   DR Revenue, CR Deferred Revenue (for amounts collected but not yet earned)
4. Reconcile deferred revenue balance = sum of remaining unrecognized amounts across all contracts.

Day 5-7: Accruals & Adjustments

Accrual Type	How to Calculate	Example
Unbilled AP	Services received but no invoice yet (e.g., lawyer worked in March, bills in April)	Estimate from hourly logs or contract
Payroll accrual	Days worked in the month but paid next month	(Monthly payroll / working days) × days between last pay date and month-end
Accrued vacation / PTO	Unused PTO days × daily rate	Only if the company's policy pays out unused PTO
Commissions accrual	Deals closed this month × commission rate	Even if commission is paid next month
Bonus accrual	Pro-rata share of expected annual bonus	If bonuses are formulaic
Prepaid amortization	Total prepaid / months of coverage = monthly amortization	12-month insurance policy = 1/12 per month
Depreciation	Asset cost / useful life (months) = monthly depreciation	Straight-line unless a better method applies
Bad debt expense	Aging-based: 1% of AR 0-30 days, 5% of 31-60, 20% of 61-90, 50% of 90+	Update the allowance account

Day 7-8: Review & Analysis

Before declaring close complete:

1. Trial balance review: all accounts have reasonable balances. No negative balances where unexpected.
2. Flux analysis: every P&L line item vs prior month and vs same month last year. Flag changes > 20% or > $10k.
3. Balance sheet tie-out: cash = bank, AR = subledger, AP = subledger, deferred revenue = schedule.
4. Gross margin check: within 2% of expected range. If not, investigate COGS or revenue classification.
5. Headcount check: GL payroll expense / number of employees = reasonable average cost per employee.

Day 8-10: Financial Statement Preparation

Hand off to financial-statement-generation for P&L, balance sheet, and cash flow statement production.

Close Checklist

=== MONTH-END CLOSE CHECKLIST ===

📥 CASH & BANK
  [ ] All bank accounts reconciled
  [ ] All credit cards reconciled
  [ ] Stripe/PayPal balance confirmed
  [ ] Outstanding checks > 60 days investigated
  [ ] Bank fees recorded

📥 ACCOUNTS RECEIVABLE
  [ ] AR subledger ties to GL
  [ ] All invoices issued for the month
  [ ] All payments matched
  [ ] Bad debt allowance updated
  [ ] DSO calculated

📥 ACCOUNTS PAYABLE
  [ ] AP subledger ties to GL
  [ ] All invoices entered
  [ ] Recurring AP auto-posted
  [ ] AP aging reviewed (nothing > 90 days unexplained)

📥 PAYROLL
  [ ] Payroll entries posted
  [ ] Payroll accrual posted (if pay date crosses month)
  [ ] PTO accrual updated (if applicable)
  [ ] Benefits invoices matched to employee elections
  [ ] 401(k) contributions and match recorded

📥 REVENUE
  [ ] Revenue recognition entries posted
  [ ] Deferred revenue schedule reconciled
  [ ] Revenue by customer trend reviewed (anomalies?)

📥 PREPAIDS & ACCRUALS
  [ ] Prepaid amortization posted
  [ ] New prepaids identified and set up
  [ ] Unbilled AP accrued
  [ ] All other material accruals posted

📥 FIXED ASSETS
  [ ] Depreciation posted
  [ ] New assets added to register
  [ ] Disposals / write-offs recorded

📥 DEBT
  [ ] Interest accrued
  [ ] Principal repayments recorded
  [ ] Covenant compliance checked

📥 EQUITY
  [ ] New option grants recorded (memo entry)
  [ ] Option exercises recorded (if any)
  [ ] SAFE/note activity recorded (if any)

📥 TAXES
  [ ] Sales tax liability reconciled
  [ ] Payroll tax liability reconciled
  [ ] Income tax provision (if applicable)

📥 FINAL REVIEW
  [ ] Trial balance balanced (debits = credits)
  [ ] Flux analysis completed, variances explained
  [ ] Financial statements drafted
  [ ] Close package sent for review

Output Format

• Completed close checklist
• Trial balance (balanced)
• Flux analysis with commentary
• Revenue recognition summary
• Deferred revenue rollforward
• Prepaid expense rollforward
• "Close complete" sign-off

Done Criteria

The skill is complete when:

1. All bank, credit card, AR, and AP accounts are reconciled.
2. Revenue recognition entries are posted and deferred revenue schedule is balanced.
3. All material accruals (payroll, unbilled AP, prepaids, commissions, depreciation, bad debt) are posted.
4. Trial balance is balanced (debits = credits).
5. Flux analysis is completed with explanations for all material variances.
6. The close checklist is fully signed off.

Pitfalls

• Rushing the close by skipping reconciliations: meeting an arbitrary deadline by skipping bank recs or subledger tie-outs guarantees errors that compound into larger problems.
• Posting journal entries to "plug" unexplained variances: plugging a variance without investigating the root cause buries the real issue. Every plug becomes a ticking time bomb for the next close.
• Deferring revenue recognition analysis: assuming "the auditors will figure it out" is dangerous. Revenue recognition errors can mean restatements.
• Treating the close checklist as optional: skipping steps because "they didn't cause issues last month" erodes process integrity. The one month you skip a step is the month it mattered.
• Closing without reviewing flux analysis: declaring the books closed before checking for unusual swings means shipping financials with undetected errors.

Heuristics

• Close within 5-10 business days: any longer and the data is stale before anyone sees it.
• Same process, every month: predictability catches errors. A changing close process is a broken close process.
• Close checklist is non-negotiable: skipping steps to go faster guarantees errors. Follow the checklist.
• Revenue recognition is the #1 risk area: it's where most startups get it wrong and where auditors dig deepest.

Edge Cases

• First month closing with accrual accounting (transitioning from cash basis): the first accrual close is the hardest. Extra time, extra review.
• Multi-entity close: close each entity separately, then consolidate. Intercompany eliminations needed.
• Acquisition mid-month: close the acquired entity separately. Post-acquisition results go into consolidated from the close date.
• Year-end close vs month-end close: year-end has additional steps (inventory counts, 1099 prep, bonus true-ups, audit prep).

Verification

Can you confirm that every balance sheet account has a supporting schedule that ties to the GL? Can you explain every swing > 20% on the P&L month-over-month? Is the close package ready for review within 10 business days? If not, the close isn't complete.

Example

1. "Run the month-end close for March 2026 — start with bank reconciliations, then handle revenue recognition and accruals."
2. "We just acquired a company mid-month. Help me close the books properly with intercompany eliminations."
3. "Review the close checklist and confirm whether we're ready to sign off on the May close."

Linked Skills

• Statement generation → financial-statement-generation
• Audit support → audit-preparation
• Controls compliance → internal-controls-design