3 Essential Bookkeeping Reports to Review Monthly

As a business owner, managing your financials can often feel overwhelming. Balancing day-to-day operations with financial oversight is no easy feat. However, carving out regular time each month to review critical bookkeeping reports can be immensely rewarding. Not only do these reports help in catching potential problems early, but they also illuminate growth opportunities and support better decision-making for your business’s future.

Income Statement (Profit and Loss Statement)

The income statement provides a summary of your income and expenses over a specific period, allowing you to gauge profitability and cost control. It's essential for budgeting and making informed investment decisions. When analyzing this report, look out for certain issues that might indicate underlying problems:

• Decreasing profit margins can signal inefficiencies or rising costs.
• An unexplained rise in operating expenses could suggest overspending.
• Consistent losses despite steady sales might point to underpricing or high overhead costs.

Balance Sheet

This statement offers a snapshot of your assets, liabilities, and equity at a particular point in time. It's a valuable tool for assessing your business's stability and making informed decisions about possible growth or identifying risks. Be cautious of these red flags:

• A shrinking cash balance could indicate financial strain, especially if the reason is unclear.
• Rising debt without corresponding income growth may suggest increased financial risk.
• Negative or shrinking owner equity might reflect underlying financial health issues.

Accounts Receivable Aging Report

This report breaks down unpaid invoices by the length of time they've been outstanding. Reviewing it helps to maintain healthy cash flow by highlighting payment delays. Look out for the following:

• An increase in late payments, especially in the 60–90+ day range, can affect cash flow and indicate collection issues.
• Relying heavily on a single customer with overdue invoices can pose a significant risk to your business's financial stability.

Taking charge of your business's financial health begins with the diligent review of these reports. By acting early on potential red flags and recognizing trends, you can protect your business and capitalize on opportunities for growth. If you have questions about bookkeeping or payroll, consider reaching out for professional assistance. Your future self will thank you.