What financial reports should I review monthly?
The three reports every business owner should review monthly are the profit and loss statement, the balance sheet, and a cash flow statement or cash position report.
The profit and loss statement shows whether you made money during the month. Revenue minus expenses equals profit or loss. Look at the trends over time rather than fixating on a single month. Is revenue growing? Are your expenses as a percentage of revenue staying consistent? Compare this month to last month and to the same month last year. For most businesses, payroll is the largest expense. If you’re working with a San Diego payroll service and bookkeeper, these numbers should flow into your reports automatically and accurately.
The balance sheet shows what you own, what you owe, and your equity at a specific point in time. This is the report business owners most often skip, but it catches problems the P&L misses. Is accounts receivable growing faster than revenue? That means customers are taking longer to pay. Are accounts payable piling up? That signals cash flow pressure. The balance sheet shows the cumulative reality that monthly profit and loss statements can hide.
Cash flow matters more than profit for day-to-day survival. You can be profitable on paper and still run out of cash to pay bills. At minimum, compare your bank balance at the start and end of each month. Better yet, review an actual cash flow statement that shows where money came from and where it went.
Beyond the big three, accounts receivable aging and accounts payable aging deserve monthly attention. AR aging shows who owes you money and for how long. Anything sitting in the 60+ day column needs follow-up before it becomes uncollectable. AP aging shows what you owe and when, helping you plan cash needs and avoid late fees.
If you maintain a budget, compare actual results to budget each month. Finding out in December that you overspent on marketing all year doesn’t help you. Finding out in April means you can adjust.
None of these reports help if the underlying data is wrong. Transactions need to be categorized correctly and bank accounts reconciled before any report means anything. This is why monthly bookkeeping matters. The reports are only as good as the books behind them.
Build the habit of reviewing these reports in the first week after each month closes. Set aside 30 minutes without distractions. Look for what changed rather than just glancing at the numbers. The changes are where the useful information hides.
San Diego's Small Business Bookkeeper
The Next Step:
A Short Conversation
A quick call to tell us about your business. We'll listen, answer your questions, and give you a clear price quote.
More Questions
What is the best accounting software for contractors?
QuickBooks Online handles job costing well for most contractors when set up correctly. Larger operations or complex billing requirements may need construction-specific software. The setup and discipline matter more than which software you pick.
Read answerWhen are California sales tax returns due?
California sales tax due dates depend on your filing frequency. Quarterly filers submit by the last day of the month following each quarter. Monthly filers submit by the last day of the following month.
Read answerWhat is bank reconciliation and why does it matter?
Bank reconciliation matches your accounting records to your bank statement to confirm they agree. It catches errors, detects fraud, and ensures your financial reports reflect reality. Without it, you don't actually know how much money you have.
Read answerWhat is a profit and loss statement?
A profit and loss statement shows your business revenue, expenses, and net income over a specific period. Also called an income statement or P&L, it tells you whether your business is actually making money or losing it.
Read answerHow do I calculate overhead for construction jobs?
Add up all your indirect business costs for the year, then divide by your allocation base (usually direct labor costs or total direct costs). The resulting percentage gets applied to each job estimate to cover those expenses.
Read answerWhat is use tax and do I owe it?
Use tax is the sales tax you owe when a seller doesn't collect it from you. Most businesses owe it on out-of-state and online purchases where no California sales tax was charged. The rate matches your local sales tax rate.
Read answer
