A Simple Month-end Close

Quick answer

A month-end close is a short, repeatable routine that makes sure your books are complete and correct for the month before you move on. For most small businesses it means recording every sale and expense, reconciling bank and credit card accounts, reviewing who owes you and whom you owe, checking GST/HST, and scanning your financial statements for anything odd. Then you lock the month and file the supporting records.

Record-keeping rules in this guide were checked against CRA pages in September 2026.

Key takeaways

• A monthly close catches errors while they are still small and easy to trace.
• The bank reconciliation is the core of the close. If your cash doesn’t reconcile, nothing else can be trusted.
• A payment-processor payout is not the same as your sales, so record gross sales, fees and refunds separately.
• Closing the period in your software protects finished months from accidental changes.
• The CRA generally requires you to keep records for six years from the end of the last tax year they relate to.

Why close your books every month

Waiting until year-end to review your books turns a few hours of monthly work into a stressful clean-up. A missing deposit from March is much harder to explain in January.

A regular close also gives you numbers you can use. You see your real profit, your real cash position and what you owe in GST/HST. If the underlying ideas are new to you, start with accounting fundamentals for small businesses.

The month-end close, step by step

Work through these steps in order. The times are a rough guide for a small business with modest transaction volume; your first few closes will take longer.

Task	Why it matters	Typical time
Record all sales and expenses	Your statements are only as complete as your entries	30–60 min
Reconcile bank and credit card accounts	Proves your books match what actually happened to your money	15–30 min per account
Review accounts receivable and payable	Shows who owes you, whom you owe, and what is overdue	15–30 min
Clear payment-processor accounts	Separates gross sales, fees and refunds from net deposits	15–45 min
Review GST/HST collected and input tax credits	Keeps your next return accurate and supportable	15–30 min
Check payroll remittances (if you have employees)	Confirms source deductions were withheld and paid	10–15 min
Update inventory and cost of goods sold (if applicable)	Makes your gross margin meaningful	15–60 min
Review the profit and loss and balance sheet	Catches misposted or missing entries	15–30 min
Lock the period and file records	Protects finished work and keeps you audit-ready	10 min

1. Record all sales and expenses

Enter every invoice, sales summary, bill and receipt for the month. The CRA expects you to track the date, amount and source of your business income, and to get receipts or other vouchers for business purchases.

2. Reconcile bank and credit card accounts

A reconciliation compares the ending balance on your statement with the balance in your books and explains every difference. Here is how to do one:

1. Start with the ending balance on the bank statement.
2. Add deposits you recorded that the bank hasn’t processed yet (deposits in transit).
3. Subtract cheques and payments you recorded that haven’t cleared yet (outstanding items). This gives the adjusted bank balance.
4. Take the balance in your books. Record anything on the statement you missed, such as bank fees or interest. This gives the adjusted book balance.
5. The two adjusted balances should match to the cent. If they don’t, look for a missing entry, a duplicate or a transposed number.

Credit card accounts work the same way.

3. Review receivables and payables

Run an aged receivables report. Follow up on overdue invoices and check that customer payments were applied to the right invoice. Then run aged payables and confirm that every bill you owe is recorded and nothing is paid twice.

4. Clear payment-processor accounts

If you get paid through Shopify Payments, Stripe or PayPal, a payout rarely matches your sales for the period. Shopify, for example, notes that processing fees are deducted before a payout is sent, and refunds and chargebacks can reduce later payouts. A common approach is a clearing account for each processor: record gross sales into it, record fees and refunds out of it, and record each payout as a transfer to the bank. At month-end the balance should equal what the processor still holds for you. See Shopify accounting in Canada for more detail.

5. Review GST/HST collected and input tax credits

Compare the GST/HST in your sales records with your GST/HST payable account. Check that each input tax credit (ITC) is supported by a proper invoice or receipt. The CRA requires sufficient documentary evidence before you claim an ITC, and the information required depends on the purchase amount, with separate requirements for purchases under $100, from $100 to $499.99, and of $500 or more. For the basics, read how GST/HST works for small businesses.

6. Check payroll remittances

If you have employees, confirm that payroll entries match your payroll reports and that source deductions were remitted on time. For how remittances work, see payroll basics in Canada.

7. Update inventory and cost of goods sold

If you sell products, make sure purchases of stock are recorded and your cost of goods sold reflects what you actually sold. The COGS calculator is a quick way to check the figure.

8. Review your statements, then lock the period

Read the profit and loss and balance sheet side by side with last month. Look for large swings, negative balances where they shouldn’t be, expenses in the wrong category and old items sitting in suspense or “uncategorized.” When everything looks right, set a closing date or lock date in your software so the month can’t be changed by accident.

Finally, file the month’s statements and receipts. The CRA generally requires records to be kept for six years from the end of the last tax year they relate to, at your place of business or residence in Canada unless the CRA gives written permission otherwise. Records created electronically have to be kept in an electronic readable format, even if you also have paper printouts.

Example: a bank reconciliation for a small Ontario retailer

Maple Lane Home Goods is a small shop in Ontario. On August 31 it closes the month. The numbers below are illustrative.

Common mistakes

• Forcing a reconciliation to balance with an unexplained adjustment instead of finding the difference.
• Recording processor payouts as sales, which understates revenue and hides fees.
• Claiming ITCs on purchases without an invoice or receipt that meets CRA requirements.
• Leaving old outstanding cheques or deposits on the reconciliation for months without follow-up.
• Editing a closed month without noting why, which makes filed returns harder to support.

Frequently asked questions

When should I do my month-end close?

Once your bank and credit card statements for the month are available, which is usually in the first week or two of the following month. Pick a fixed day and keep to it.

What if I find an error in a month I already closed?

Correct it with a dated adjusting entry and a short note explaining the change. If the error affects a GST/HST return you have already filed, check with the CRA or your accountant on how to correct it.

Related on Ronidex

• Download the Small Business Bookkeeping Checklist and the Monthly Cash Flow Checklist from Ronidex’s free resources.
• Once the month is closed, project the next few months with the cash flow calculator.

If you’d rather have help keeping your books, see Ronidex’s bookkeeping and accounting support.