At the end of a specific period, bookkeepers will “close the books,” or wrap up everything for a given month, quarter, or year. This concept might seem complex, but the process can be simple if you keep your books organized throughout the year. Simply put, closing the books means ensuring that every transaction or expense is recorded and all of the information that a bookkeeper needs to put together their reports—like income statements and balance sheets—is present. By “closing the books,” a bookkeeper can seal financial records for a period of time and know that they’ll be accurate and orderly when reviewed again. When Should You Close the Books? Different organizations close their books at various parts of the year. You can review your books on a monthly basis or go over them at quarterly or annual intervals. Many small businesses have unique processes for closing the books at different periods. For example, a company would ensure that its expenses and income transactions are accurate on a monthly basis and then conduct a quarterly review ahead of an important meeting with the board or investors. Then, the company would review the financials at the end of the year, ahead of tax season, and close the books once all invoices for the year have been paid and the taxes have been filed. The books are typically developed by an accounting professional and then reviewed by the business owner or executive. Once this person signs off on their accuracy, then they can be considered closed. This adds extra layers of protection and accountability to show the books are correct and in order. When Does Closing the Books Become Complicated? While closing the books is often a straightforward process, there are times when it can become complicated to wrap up a financial period in a company’s history. A few examples of complications include: \tThe person in charge of bookkeeping didn’t categorize expenses, leading to ambiguity about where the money went. \tThere’s a backlog of several months when various invoices and costs weren’t recorded, turning a simple process into a large project. \tYour business uses a complicated accounting process (like accrual-based accounting) that follows a strict set of rules and multi-entry documentation. Fortunately, many of these factors are in your control. You can set up clear categorization for better insight into your business and prevent a backlog of invoices from building up. Good organization and attention to detail are the antidotes to overwhelming bookkeeping projects. Take Over Your Ledgers With Intuitive Accounting Software If you want to get better at closing your books and maintaining detailed financial records, consider using a tool like Lendio's software to organize your systems. Our app is free to use for small businesses and won’t restrict your abilities with hidden features and upsells. If you want help working through a backlog of receipts or categorizing transactions, consider hiring our bookkeeping services. We can assign a team of professionals to go through your receipts and help you to close your books with ease.