Nobody started an EMS company because they love doing bookkeeping work. But if you want reliable reports and clean data, you’ve got to have good accounting practices.

Here’s a checklist for what you (or your finance team) should be doing after the end of each month. And if they aren’t, they should start right away.

Reconcile Your Subledgers

A subledger is the drilled down details of your general ledger. It tracks the gritty details—like who paid what and when—so your main ledger doesn’t have to get bogged down with every little thing. Think receipts drawer, but digital and organized (hopefully). The most commonly used subledgers for EMS companies would be:

1. Bank accounts
2. Credit cards
3. Accounts receivable
4. Accounts payable
5. Inventory (raw materials, WIP, finished goods)

Reconcile your subledgers to the general ledger on your balance sheet accounts. That means making sure your bank and credit card statements match the general ledger — no mystery transactions, no uncleared checks from six months ago.

Next, verify that your accounts receivable and payable aging reports tie to the balance sheet. Your inventory subledger should align with the inventory balance on the books. Any differences could be timing issues, shrinkage, or bad counts. Either way, fix them now before they snowball.

Why is this important? It is a financial control to help prevent fraud or embezzlement. If someone is pulling money from your bank account off the books (think: hand writing checks), then a good reconciliation process will catch it.

Review Fixed Assets and Depreciation

If you’ve bought any new equipment or tools during the month, make sure those assets are recorded properly. Depending on your ERP system, the classification on the purchase order might have automatically done this, so make sure you don’t count the same asset twice.

Then, post the monthly depreciation. Many people maintain a depreciation schedule in a spreadsheet. But then you have to make sure that new assets are also added to the spreadsheet and considered in the depreciation schedule. Where available, use recurring journal entries function in your accounting system so you don’t have to do each month’s entries manually. But again, make sure you mark the recurring entries in the depreciation schedule so you don’t end up double counting.

Why is this important? Aside from it being an IRS requirement to track your assets, it also helps you know how much stuff your company owns and the (approximate) value of your stuff. Accurate asset accounting will save you from headaches during audits (from the bank or during due diligence).

Handle Accruals and Prepaids

Month-end is your chance to post any accruals for expenses or revenue that belong in this period, even if the money hasn’t moved yet. Think annual subscriptions that should be accrued monthly like software licenses or insurance premiums. Technically things like payroll and unbilled customer work also fall into this category, but most EMS companies (in USA, without strict financial reporting) only do those at year end.

Why is this important? Accounting for accruals and prepaids helps you smooth out your margins so that they don’t jump or drop because of a one-off annual payment. It lets you better understand if you actually made a profit or not.

Reconcile Loans and Notes Payable

If you’re carrying debt, reconcile those balances too. Make sure the loan balances on your balance sheet match the lender statements, and split each payment between principal and interest. Don’t just dump the whole thing in “loan expense” because that’s not a thing.

Why is this important? It let’s you know how much of a loan you have left to pay back and how much interest you’re paying out. Those are two separate things as one impacts your balance sheet and the other impacts your P&L.

Review Revenue and Cost of Goods Sold

Double check that revenue is being recognized in the correct month. Pull forward anything that slipped, and defer anything that showed up early. Then match your cost of goods sold to what actually shipped and what was purchased. If your margins look weird, this is where to start digging.

This is especially important in cases where you’re getting consigned material from customers or collecting prepayments from customers. Remember: Prepayments for work not yet completed is a liability and not revenue.

Why is this important? Putting entries in the wrong period can lead to misleading financial figures. And as the saying goes: what goes up, must come down - usually in the next accounting period.

Double-Check Payroll

Verify that all payroll journal entries are posted accurately — wages, taxes, benefits, etc. The total payout amount from your bank account should match the payroll service reports. Also make sure that your payroll service provider (or you, if you haven’t outsourced this) has paid the payroll taxes. 

Why is this important? Payroll is usually a big expense in EMS, so if it is posted out of period or missing a line item, that could lead to misleading financials for the period. Also, not paying payroll taxes is a good way to get on a first name basis with the IRS.

Review Your Financial Statements

After you’ve done all of the above, pull your reports and take a look. Compare this month to last month, and to your budget/plan. Look for anything that jumps out — large swings, missing line items, or numbers that just don’t make sense. My preference is to keep a trailing twelve months rolling financials report. That way you can see how each account moves up or down over time rather than looking at the numbers in silos.

Also, take a minute to confirm that your balance sheet actually balances. It sounds obvious, and it is.

Why is this important? Large movements of accounts usually mean either a material change in your business or a material change in your bookkeeping practices. Both are cases where you would want to pay attention.

Lock It Down

Once everything looks good, close the books. What is closing the books you ask? It means blocking the system from accepting edits to that financial period (without some administrator override). Set the lock in your accounting system and archive your key financial reports. Key financial reports can mean different things for different businesses, but generally err on the side of keeping an archived copy because hard drive space is cheaper than hours spent digging through GL transactions to figure out what you were thinking 8 months ago.

Why is this important? Locking the period prevents someone from miskeying an invoice for 1 year ago because of a typo, and now your accountant has some questions right before the tax deadline. Also, it helps prevent fraud or embezzlement.

Bottom Line

Closing the books isn’t glamorous, but it’s essential. Clean financials mean fewer surprises, better decisions, and a lot less side-eye from your CPA.

Still feels like a chore? We get it. That’s why we help EMS execs clean up their systems and processes so the close runs (mostly) on autopilot—even the financials.