Monthly Close, Part 3: Cutoffs, Review, KPIs & Owner Summary (Steps 7–10)
Step 7) Post non‑cash & cutoff entries
What: Depreciation/amortization; accruals (utilities, interest); deferrals (annual SaaS); inventory adjustments. Why: GAAP‑aligned timing makes your margins real, not seasonal. Pro tip: Build a recurring journal template per category.
Step 8) Review P&L and Balance Sheet
What: Scan for odd swings vs. last month and same month last year; tie Balance Sheet subledgers to detail (AR/AP/Inventory/Prepaids/Loans). Why: Variance review catches miscodings that rules miss. Pro tip: Require a 2‑minute note for any variance >10% or >$1,000.
Step 9) Update KPIs
Track monthly and trend over time:
Gross Margin % = (Revenue – COGS) ÷ Revenue
Operating Margin % = Operating Income ÷ Revenue
Cash Runway (months) = Cash ÷ Avg Monthly Net Burn
AR Days (DSO) = (Avg AR ÷ Credit Sales) × 30
AP Days (DPO) = (Avg AP ÷ Credit Purchases/COGS) × 30
Inventory Days (DIO) = (Avg Inventory ÷ COGS) × 30
Cash Conversion Cycle (CCC) = DSO + DIO – DPO
Burn Multiple (startups) = Net Burn ÷ Net New ARR
Step 10) Publish a one‑page owner summary
Template:
What happened: (3 bullets)
Why it happened: (3 bullets)
What to do next: (3 bullets, owners & dates)
KPIs: GM%, Opex %, Cash Runway, AR/AP Days, CCC, Burn Multiple
Attachments: P&L, Balance Sheet, Cash Flow, AR/AP Aging
Common red flags (and quick fixes)
Big “Uncategorized” balances → Create rules; reclass in batches.
AR growing faster than revenue → Tighten terms; enable auto‑pay; send DSO report weekly.
AP always overdue → Move to bi‑weekly payment runs tied to a cash forecast.
High swings in “Ask My Accountant” → Replace with specific expense accounts; add reviewer notes.
Cash surprises → Implement a 13‑week rolling cash forecast (update every Friday).
FAQ
Do I need accrual accounting if I’m small? If you sell on terms, prepay annually for software, or carry inventory, accruals will make margins and cash planning far more accurate.
Can you work with my current bookkeeper or CPA? Yes—most clients keep their tax CPA. We focus on operational books, reporting, and forecasting; we’ll collaborate with your existing partners.
What software do you support? QuickBooks Online, Xero, Zoho Books, plus Bill.com, Ramp, Gusto, and Stripe.
Ready to simplify your monthly close? Schedule a consult or try our free Financial Health Assessment to see what to fix first.
Local note
Serving Colorado Springs and the Front Range from Monument, Colorado, plus clients nationwide.
