The Financial Reports to Review Every Month

Profit and loss statement

The profit and loss statement, or income statement, shows revenue minus costs for the month. It tells you whether the business made money.

Review it against the prior month and the same month last year. Look at gross margin first: revenue minus the direct cost of delivering your product or service. Then look at operating expenses line by line.

Questions to ask: Did any cost jump? Did revenue move because of price, volume or one large job? Are you categorizing expenses correctly? Our income statement guide explains each section.

Balance sheet

The balance sheet is a snapshot of what you own, what you owe and what is left for the owners on a single date.

Check cash, receivables, inventory, loans and owner equity. Two quick tests are worth running monthly:

• Current ratio. Current assets divided by current liabilities. A figure below 1 means short-term bills exceed short-term assets.
• Debt trend. Is total debt rising faster than revenue?

See income statement vs. balance sheet for how the two statements fit together.

Cash flow statement

The cash flow statement tracks money in and out of your bank accounts. It explains why cash changed even if profit looked fine.

A profitable month can still drain cash when you buy inventory, pay down a loan or wait on slow customers. The cash flow statement separates operating activity from investing and financing so you see the cause.

Track your ending cash against a minimum cushion, such as one month of fixed costs. If you keep falling below it, the next step is a forecast. Read cash flow analysis for the method.

Accounts receivable and payable aging

Aging reports list unpaid customer invoices and unpaid bills by how overdue they are. They show where cash is stuck.

Receivables aging groups invoices into buckets such as current, 30 days, 60 days and 90 days. Anything over 60 days deserves a call. A few large overdue invoices can explain a whole month of tight cash.

Payables aging shows what you owe and when. Paying every bill at the last possible day is fine. Missing due dates damages supplier relationships and can cost late fees. Compare both reports side by side to see if collections cover payables over the next 30 days.

Budget versus actual and a short KPI list

Compare actual results to your budget or forecast, and track a handful of numbers that matter for your business.

Pick five or six measures and stick with them:

• Revenue and gross margin percentage
• Operating profit
• Ending cash balance
• Days to collect from customers
• Debt payments as a share of revenue

Write one sentence for each variance that is large. That habit forces you to understand it. If your numbers are not reliable yet, start with bookkeeping tips.

A simple monthly close routine

Reconcile bank accounts, record all invoices and bills, review the reports, and note any decisions. A routine takes one to two hours once habits form.

1. Reconcile every bank and card account to the statement.
2. Enter all invoices and bills for the month.
3. Review the profit and loss, balance sheet and cash flow reports.
4. Check the aging reports and schedule collection calls.
5. Record decisions and next month's targets.

Clean monthly reports also speed up funding. For ROI Funder, a complete file is your application plus three months of business bank statements, and funding can arrive the same business day on approved, complete files. Organized books make decisions easier.

If reports show a gap that a short-term product could close, see working capital or a business line of credit. ROI Funder considers 500+ FICO, 6+ months in business and $20,000+ monthly revenue.