Monthly bookkeeping checklist

Work through the tasks in this order. Reconciling before you read the reports means the figures you review are ones you have already checked.

Bank and card statements, supplier statements and many regular bills follow a monthly cycle, which makes the month a natural block of work to finish and check. business.gov.au notes that profit and loss statements are usually done monthly, quarterly or yearly, and closing the books each month gives you figures while they can still change your decisions.

The month-end check sits on top of a lighter weekly habit. On its page about signs a business is in financial trouble, business.gov.au suggests reviewing and updating your financial records every week to find problems early. Entering transactions weekly leaves month end for checking rather than catching up.

A check is only as good as the records behind it, so start by making the month complete:

• sales invoices issued during the month, and records of cash and card takings
• supplier bills and receipts, including small purchases paid in cash
• bank, card and loan transactions, entered or imported up to the last day of the month
• petty cash payments and anything else that did not pass through the bank
• money the owners put in or took out, recorded in the accounts your accountant has agreed for your business structure.

Match each entry to its document as you go. Where an invoice or receipt hasn't turned up, request a copy now, while the transaction is still fresh in everyone's mind.

A reconciliation compares your books with a record kept outside the business and explains every difference between them. Each account that has such a record gets one:

• each business bank account, against its statement
• each business credit card, against the card statement
• loans and other finance, against the lender's statement
• payment platforms and merchant accounts, against their own reports
• petty cash, by counting the cash and adding up the vouchers.

Card and cash takings need the same care. The ATO's record-keeping tips suggest regularly checking that the cash and card sales in your own records match outside records, then entering the amounts in your main accounting system. For card takings, the payment provider's report is one such record. How often is up to the business: the ATO gives daily, weekly or monthly as the options.

If a difference remains that you can't explain, find it before moving on. A missing or wrong entry is far easier to trace this month than at the end of the year.

Bring up the list of unpaid customer invoices and sort it from oldest to newest.

• Match each payment received this month to the invoice it pays, so settled invoices drop off the list.
• Follow up invoices that are past their due date, starting with the oldest.
• Add a note to any invoice the customer has queried, so the list shows what is in dispute.
• If you use accrual accounting, compare the total of the list with the accounts receivable balance in your books, and find the cause of any difference.

• Compare the unpaid bills in your books with each supplier's statement, so no bill is missing or entered twice.
• List the payments falling due next month, such as supplier invoices, rent, loan repayments and licence renewals.
• Set reminders or schedule those payments ahead, as business.gov.au's cash flow guide suggests.

business.gov.au's cash flow checklist includes checking inventory levels regularly and recording any changes, and its inventory guide notes that most businesses count their stock every month or every quarter. It also stresses recording every sale and return, so the records you count against are current.

When a count differs from the records, the difference can go either way: less stock than recorded or more. Record it, then look for the cause, such as a sale or delivery that was never entered.

With the accounts reconciled, the reports are worth reading closely.

• Profit and loss statement: business.gov.au describes it as a list of your sales and expenses that shows how much profit you are making or losing. Look for income or costs that are much higher or lower than usual, which can point to an entry in the wrong account.
• Balance sheet: check that the bank, card and loan balances match the book balances in the reconciliations you have just done.
• Budget: compare the month's actual income and spending, from the profit and loss statement, with the budget, which business.gov.au suggests doing every month.
• Cash flow statement: add the month's actual figures. business.gov.au recommends keeping it current, so that seasonal patterns and payment cycles show up.

• File the documents behind the month's entries in the same place and the same way each month.
• Back up your digital records. Where possible, business.gov.au suggests a secure copy kept off-site, and says that may include cloud storage.
• Protect what you keep: business.gov.au says records need to be stored in a way that stops them being altered or damaged.
• Once the month is checked, treat it as closed. If something in a closed month later needs changing, ask your accountant how to record the correction.