# The monthly close

> **Do the books once a month, for the prior month, in one sitting.** It works the same in QuickBooks, Wave, a spreadsheet, or plain-text accounting. Most of the value is in steps 3 and 4, where solo practices usually get quietly wrong numbers.

**When:** the first week of each month, for the month before.
**Time:** 30 to 60 minutes once it's routine.

---

## Setup (once)

- **A separate business checking account,** and ideally a business credit card, so every transaction on them is business.
- **A tax savings account** at the same bank, so transfers are instant.
- **A [chart of accounts](https://toolkit.marcusberley.com/chart-of-accounts/).**

---

## The routine

### 1. Pull the month's transactions

Export or sync the business checking, tax savings, and business card for the month.

> **Watch for dropped rows.** Some aggregator apps skip transaction types, and small interest credits on savings are a common casualty. Confirm you have the interest line for each account.

### 2. Categorize

Assign each transaction: income, an expense category, a transfer between your own accounts (checking ↔ tax savings), a card payment, or an owner draw/contribution.

**Stop and look harder at:** anything large you're unsure about, cash withdrawals, transfers to accounts you don't recognize, and anything that might be personal.

### 3. Book the card-processing fees (the step everyone misses)

If clients pay by card through your electronic health record (EHR) system (usually on Stripe), deposits arrive **net of fees**, and the fees never appear as their own transaction. If you only book deposits:

- your revenue is understated,
- a real deductible expense disappears,
- and at year-end your income won't match the **1099-K** the processor sends the Internal Revenue Service (IRS), which is built from **gross** charges.

**Fix:** once a month, get the month's **gross / fees / net** from your EHR's income report or the Stripe dashboard, then record one adjusting entry:

```
Last day of month   "Card processing fee gross-up: [Month]"
  Expenses: Merchant processing fees     + [fees]
  Income:   Therapy sessions             + [fees]   (increasing income)
```

Nothing else catches this: your bank balances reconcile without it, because the entry never touches a bank account.

Your EHR's monthly revenue won't match booked income exactly, since the EHR reports when sessions were *charged* and your books when money *arrived*. That gap is timing; don't hunt for it.

### 4. Reconcile to the statement

For each account, **take the closing balance from the bank's statement or website** and compare it to your books.

> **The number must come from the bank, never from your books.** Comparing your books to themselves detects nothing.

If it doesn't match, **something is missing**, usually a fee, an interest credit, or a transfer. Find it rather than forcing the balance.

### 5. Sweep the tax reserve

Move this month's tax set-aside from checking to tax savings ([quarterly taxes](https://toolkit.marcusberley.com/quarterly-taxes/) covers sizing it). Next month's close books the transfer.

### 6. No client information in the books

Scan payees, memos, and notes for client names, diagnoses, or anything clinical, and remove them. Therapy income appears as processor payouts or aggregate deposits, never named sessions. Bookkeeping software typically has no business associate agreement (BAA), so it must stay free of protected health information (PHI).

---

## Quarterly

- Save the quarter's **profit & loss (P&L)**, **balance sheet**, and **general ledger** as PDFs.
- Pay the quarter's federal estimate.

## Year-end

- Confirm annual therapy income roughly matches the processor's **1099-K gross** plus any non-card payments (checks, cash), and note the non-card income for your certified public accountant (CPA).
- Confirm the 12 monthly fee entries add up to the processor's annual fee total.
- Hand your CPA the year's P&L, balance sheet, and 1099-K.

---

## A note on tools

Anything works if you do the routine:

- **QuickBooks Online / Xero:** bank feeds and a CPA who already knows it. Monthly cost; no BAA, so keep it PHI-free.
- **Wave or a spreadsheet:** free and enough for a simple private-pay practice.
- **Plain-text accounting (Beancount + Fava):** free, local, precise, and pairs well with an AI assistant, if you're comfortable with a text editor and command line.