It’s often said that humans are “creatures of habit,” and accountants might take that to the next level. Whether in our personal or professional lives, routines help create consistency, and when it comes to your company’s financial reporting, consistency is key. Establishing sound month-end close habits ensures your business can produce reliable financial statements and accurately monitor performance throughout the year. Strong reporting also gives outside parties, like bonding companies and banks, confidence in your financial stability. 

Below are suggested procedures from an auditor’s perspective that can help strengthen your monthly close process, particularly focusing on the balance sheet. 

1. Cash/Bank Accounts

• Verify that the bank balance on your reconciliation agrees with the bank statement. 
• Confirm that the cash recorded on the trial balance matches the reconciliation’s ending cash balance. 
• Review outstanding checks older than six months and determine which should be voided. 
• Investigate any unusual reconciling items and resolve them promptly.

2. Accounts Receivable

• Ensure the total from your accounts receivable aging agrees with the trial balance. 
• Identify and follow up on significant past-due balances or document their collection status. 
• Review retainage terms (if applicable). 
• Discuss with management whether any overdue accounts should be reserved against or written off as bad debt.

3. Other Current Assets (Prepaid Expenses/Other Receivables)

• Review balances to confirm the existence and appropriateness of assets listed on the balance sheet. 
• Maintain an up-to-date schedule that tracks activity and ties to the trial balance. 
• For prepaid expenses, verify amortization calculations and adjust related expenses as needed. 

 4. Fixed Assets

• • Acquisition or disposal date 
  • Asset description 
  • Invoice copies for purchases exceeding your capitalization threshold 
  • Any proceeds from sales, disposals, or trade-ins 
  • Record monthly depreciation or amortization expense. 
  • Reconcile balance sheet accounts to depreciation schedules, verifying that asset categories, accumulated depreciation, and expense amounts agree. 
  • Review “equipment” expense accounts to ensure capitalizable purchases are properly recorded as fixed assets. 
    

5. Accounts Payable

• Confirm that the accounts payable aging total matches the trial balance. 
• Review for unapplied or unusual balances. 
• Check vendor terms for any available discounts related to early payment. 

6. Accrued Payroll and Related Payroll Liabilities 

• Trace payroll accrual balances to supporting payroll records. 
• Confirm the number of days accrued is accurate for the pay period. 
• Reconcile payroll-related liabilities to subsequent payroll tax filings. 

7. Other Accrued Expenses

• Verify that all balances can be traced to specific expenses. 
• Consider any additional liabilities that should be recorded in the current period. 
  

 8. Notes Payable/Long-Term Debt

• Reconcile your debt schedule to reflect monthly principal and interest payments. 
• Ensure interest expense agrees with the income statement. 
  

 9. Update Work in Progress (WIP) Schedule 

• New contracts and change orders 
• Monthly billings 
• Current-period job costs and overhead 

• Contract price 
• Estimated costs or change orders 
• Review the summarized schedule of contract activity to identify any necessary estimate revisions. 
• Record adjustments for underbillings or overbillings and reconcile to the balance sheet. 

 10. Income Statement Analysis

• Run a year-to-date income statement and compare it to the same period from the prior fiscal year. 
• Investigate any unusual fluctuations. These could stem from improved efficiency, timing differences, or one-time charges. 
• This review helps ensure accuracy and can uncover miscoded transactions before year-end. 

Strengthen Your Month-End Close Processes with Lutz 

From project accounting and WIP analysis to long-term financial strategy, our experts understand the unique challenges of the construction industry. We help contractors strengthen financial operations, streamline reporting, and build sustainable growth. Contact us with questions.