Most business owners should review five reports every month: the profit and loss statement, the balance sheet, a cash flow report, aged receivables and payables, and a budget versus actual comparison. Together they show whether you are making money, whether you have money, and whether the business is tracking to plan. Reviewing them monthly means problems surface while there is still time to act.
What Each Report Tells You
Profit and loss. This shows income, expenses and profit for the month and year-to-date. Look at trends rather than single months: is your gross margin holding, and are any expense lines creeping up faster than revenue?
Balance sheet. This is a snapshot of what the business owns and owes on a given day. It shows things the profit and loss can’t, such as rising debt, money owed to the tax office, or cash tied up in stock.
Cash flow. A business can be profitable and still run short of cash. This report shows where money actually came from and where it went, so you can see a squeeze coming before it arrives.
Aged receivables and payables. These list who owes you money, who you owe, and how overdue each amount is. Slow-paying customers are one of the most common reasons a healthy business feels tight.
Budget versus actual. Comparing results against what you planned turns the other reports into decisions. If you don’t have a budget yet, that is usually the first thing worth building.
The reports only help if someone reads them with you. Most cloud accounting software, including Xero, produces all five in minutes. The value is in the conversation about what they mean and what to do next. That is exactly what one of our clients describes when she says, “We meet with Kylie every month for business and financial planning.”
Want Someone to Read the Numbers With You?
If your reports are produced but rarely discussed, a regular review meeting can change that. See how our business advisory meetings work, learn more about MYC Partners Accountants, or speak with our team about setting up a monthly review. You can also read what happens in a monthly business advisory meeting.