A month-end close checklist for MSPs

A generic close checklist covers bank reconciliations and payroll. An MSP close has to cover more, because revenue comes from recurring agreements, project work, prepaid blocks and resold licenses, and costs come from distributors and vendors that bill on their own schedules.

The order matters. If you reconcile the bank before billing is final, or book deferred revenue before you know what was invoiced, you end up redoing steps. The sequence below is built so each step relies on the ones before it.

The checklist, in order

1. Finalize agreement billing. Confirm recurring agreement invoices for the month were generated and sent. Check that new clients were added and that terminated clients were removed or prorated. Compare the count of active agreements to last month and make sure every change has a reason.
2. Review agreement additions and quantities. Seat counts, endpoints and user-based additions drift. Compare what you billed against what you are managing according to your RMM or license portal. Unbilled additions are revenue you already paid to deliver.
3. Bill project and time-and-materials work. Close out time entries for completed projects and billable tickets. Make sure approved time was invoiced and that nothing billable is sitting unapproved.
4. Tie PSA billing to the books. Compare invoice counts and totals for the period between your PSA and the accounting system, and clear the sync error log. Anything that failed to sync is missing from revenue and AR.
5. Enter vendor and distributor bills. Get every distributor, vendor and tool invoice for the month into accounts payable. Ask for missing invoices instead of waiting for them to arrive next month.
6. Reconcile license true-ups. Compare license quantities on distributor invoices to quantities billed to clients. Mid-month adds and removals, and annual commitments that can't be reduced, are where gaps appear. Bill the client for shortfalls or record the cost you are absorbing.
7. Record deferred revenue. For prepaid support blocks, annual agreements billed upfront and project deposits, move the unearned portion to deferred revenue and recognize what was earned this month.
8. Record payroll and technician time. Post payroll, payroll taxes and benefits. Split technician cost between cost of service and operating expense the way your chart of accounts is set up, and accrue wages earned but not yet paid at month end.
9. Amortize prepaid tools and expenses. Expense the current month's share of annual software subscriptions, insurance and other prepaid items.
10. Reconcile bank and credit card accounts. Reconcile every operating, payroll and savings account and every company card. Code card charges, which often include tool subscriptions that belong in cost of service.
11. Review AR. Run the aging report, confirm it matches the AR balance on the balance sheet, follow up on past-due accounts and apply any unapplied payments or credits.
12. Review the financials. Compare revenue, cost of service and gross margin by service line to the prior month and to budget. Investigate swings before you call the month done.
13. Close the period. Lock the period in the accounting system so nobody posts to it by accident, and save the reconciliations and supporting reports.

Two examples of the numbers involved

Here is an illustrative example of deferred revenue. A client prepays a 40-hour support block at $150 per hour, so $6,000. In the first month the team uses 12 hours. You recognize 12 times $150, or $1,800, as revenue, and the remaining $4,200 stays in deferred revenue as a liability until the hours are used or the block expires under your contract terms.

And an illustrative prepaid tool. You pay $3,600 upfront for an annual subscription to a documentation platform. Record it as a prepaid asset and expense $300 each month for 12 months. Expensing all $3,600 in one month makes that month's margin look worse and the next eleven look better than they are.

Where MSP closes usually slip

Steps 2 and 6 are the ones that get skipped when time is short, and they are often where margin leaks. An agreement billed for 45 users while you manage 52 is labor and tooling you deliver for free. A license count that runs ahead of what you bill is cost with no matching revenue.

Timing is the other problem. Distributor invoices often arrive after the month ends. Set a cutoff date, such as the fifth business day, and accrue any known costs that haven't been invoiced yet so the month reflects what it cost to serve your clients.

Keep the checklist in a shared document and record who did each step and when. After a few months you will know how long the close takes and which steps cause delays.

This checklist is general information. Your contracts, revenue recognition policies and systems may call for different steps or a different order, so adapt it with your accountant.