Month-End Close Procedure

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: Accounting, CFO, Controller

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Purpose

Establish procedures for timely, accurate month-end financial close to support decision-making and reporting.

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Close Calendar

Target: Close Within 10 Business Days

Day	Activity
1-2	Preliminary close activities
3-4	Revenue recognition, job cost
5-6	Expense accruals, reconciliations
7-8	WIP review, adjustments
9-10	Final review, issue financials

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Pre-Close Activities (Before Month-End)

Week Before:

• Review open AP for accruals needed
• Identify missing invoices
• Review job cost postings
• Remind PMs of WIP requirements
• Clear reconciling items from prior month

Last Day of Month:

• Ensure all time submitted
• Post final payroll entries
• Verify bank activity complete
• Note any known accruals

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Close Checklist

Day 1-2: Preliminary Close

Cash & Banking:

• Record all bank transactions
• Reconcile bank accounts
• Record transfers
• Clear outstanding items

Receivables:

• Post all billings
• Record collections
• Apply payments to invoices
• Review AR aging

Payables:

• Enter all invoices received
• Post payments made
• Accrue known unbilled items
• Review AP aging

Day 3-4: Revenue & Job Cost

Job Cost:

• Verify all labor posted
• Verify all material posted
• Verify all subcontract costs posted
• Review cost allocation

Revenue Recognition:

• Calculate % complete by job
• Update EAC for each job
• Calculate earned revenue
• Record over/under billing adjustment

WIP Schedule:

• Update contract values
• Update costs to date
• Update estimates to complete
• Calculate margins

Day 5-6: Accruals & Reconciliations

Accruals:

• Payroll accrual
• Unbilled AP accrual
• Insurance accrual
• Interest accrual
• Other known items

Reconciliations:

• Intercompany accounts
• Clearing accounts
• Prepaid expenses
• Fixed assets / depreciation
• Loans and notes payable

Expense Review:

• Review G&A expenses
• Verify proper coding
• Investigate unusual items

Day 7-8: WIP Review & Adjustments

PM WIP Review:

• Each PM reviews their jobs
• Validate % complete
• Confirm EAC
• Sign off on WIP

Adjustments:

• Record WIP adjustments
• Post any corrections
• Review trial balance
• Clear suspense accounts

Day 9-10: Final Review & Issue

Final Review:

• Controller review of financials
• CFO/executive review
• Variance analysis (budget vs actual)
• Comparative analysis (prior month/year)

Issue Financials:

• Finalize financial statements
• Prepare management reports
• Distribute to stakeholders
• Bank reporting (if required)

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Key Reconciliations

Bank Reconciliation:

Bank Statement Balance:        $__________
Add: Deposits in transit:      $__________
Less: Outstanding checks:      $__________
Adjusted Bank Balance:         $__________

Book Balance:                  $__________
Add: Interest earned:          $__________
Less: Bank fees:               $__________
Adjusted Book Balance:         $__________

Difference (should be $0):     $__________

AR Reconciliation:

AR Subledger Total:            $__________
GL AR Balance:                 $__________
Difference:                    $__________
Explanation: ___________________________________

AP Reconciliation:

AP Subledger Total:            $__________
GL AP Balance:                 $__________
Difference:                    $__________
Explanation: ___________________________________

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WIP Close Process

For Each Project:

1. Update Contract Value

   • Original contract
   • • Approved change orders
   • = Current contract value

2. Update Costs to Date

   • All labor posted
   • All materials posted
   • All subs posted
   • All other costs

3. Update Estimate to Complete

   • PM validates EAC
   • Documents basis
   • Notes any changes

4. Calculate % Complete

   % Complete = Cost to Date ÷ EAC

5. Calculate Earned Revenue

   Earned = Contract × % Complete

6. Calculate Over/Under

   Over/Under = Earned - Billed to Date

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Revenue Recognition Entry

Monthly Entry:

If Under-billed (Earned > Billed):
  DR: Underbillings (Asset)
  CR: Revenue

If Over-billed (Billed > Earned):
  DR: Revenue
  CR: Overbillings (Liability)

Journal Entry Example:

Project 101: $50,000 under-billed
Project 102: $30,000 over-billed

Entry:
DR: Underbillings     $50,000
DR: Revenue           $30,000
CR: Overbillings              $30,000
CR: Revenue                   $50,000

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Month-End Reporting Package

Standard Reports:

Report	Purpose	Audience
Income Statement	Profitability	All
Balance Sheet	Financial position	All
Cash Flow	Liquidity	CFO
WIP Schedule	Job profitability	PM, CFO
AR Aging	Collection status	AR, CFO
AP Aging	Payment obligations	AP, CFO
Backlog	Future revenue	Sales, Exec
Budget vs Actual	Performance	All

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Variance Analysis

Significant Variances to Explain:

• Revenue > 5% from budget
• Gross margin > 2% from budget
• Any expense > 10% from budget
• Any unusual items

Variance Report:

Account: ________________

Budget:              $__________
Actual:              $__________
Variance:            $__________
Variance %:          __________%

Explanation:
___________________________________________
___________________________________________

One-time or ongoing? _____________________
Action needed? ___________________________

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Related Documents

• WIP Reporting
• Job Costing
• Financial Statements
• Banking Reporting

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