What Should a Monthly Bookkeeping Service Include?

The monthly checklist

Every month, a complete service does all of this, in this order:

• Pull in bank and card transactions through feeds.
• Categorize each transaction and ask you about the ones it cannot identify.
• Reconcile every bank, credit card and loan account to its statement.
• Record payroll, loan payments and other journal entries.
• On accrual books, post accruals, prepaid expenses and depreciation.
• Review the balance sheet for anything that looks wrong.
• Close the month and send the reports.

The reports you should receive

At minimum, three statements: the profit and loss (income statement), the balance sheet and the cash flow statement. If you invoice customers or pay suppliers on terms, add accounts receivable and accounts payable aging reports.

Ask for the reconciliation reports too. They prove each account was tied to its statement, and your tax preparer or lender may ask for them.

At year-end, expect everything the tax return is built from: the full-year statements, the general ledger, fixed asset and loan schedules, and the records needed for any 1099 forms. SF Business Solutions prepares and files the return from those same books. A service that cannot produce this without extra fees is not doing complete monthly books.

Cash or accrual basis

On the cash basis, you record income when you receive it and expenses when you pay them. On the accrual basis, you record them when they are earned or incurred, whenever the money moves. IRS Publication 538 explains both.

Corporations and partnerships whose average annual gross receipts exceed the IRS gross receipts test ($26 million, indexed for inflation) generally must use accrual. Many smaller businesses choose accrual anyway because it shows real monthly profit. Accrual books take more work, so they often cost more.

How fast the close should be

A close within the first two or three weeks of the next month is a reasonable standard for a small business. Pilot publishes reports by the 10th business day on its Core plan and the 6th on its Custom plan. SF Business Solutions closes between the 5th and 15th of the following month, depending on when your documents arrive.

The biggest cause of a late close is missing information: receipts, loan statements, answers about unknown transactions. Send them early and the close comes early.

What usually costs extra

Most monthly plans exclude payroll processing, paying bills for you, invoicing, sales tax filing, tax returns and catch-up work on past months. Ask for a written list of what is in and out before comparing prices.

Signs your service is missing something

If any of these are true, ask your bookkeeper about them this month.

• Your bank balance in the books does not match the bank statement at month-end.
• An 'uncategorized' or 'ask my accountant' account keeps growing.
• You get a profit and loss but never a balance sheet.
• Loan balances in the books have not changed in months.
• Your tax preparer has to adjust the books before filing every year.