Three Essential Bookkeeping Reports to Monitor Monthly

Running a business can feel like an endless juggling act, and managing financial oversight often adds to the overwhelm. As a business owner, you may sometimes find it difficult to focus on essential tasks while balancing multiple responsibilities. Regularly setting aside time each month to review critical financial reports can be transformative. Not only do these reports help catch potential problems early, but they also highlight growth opportunities and drive better decision-making.

Accounts Receivable Aging Report

The Accounts Receivable Aging Report is a breakdown of unpaid invoices, organized by the duration they’ve been outstanding. This report plays a crucial role in maintaining a healthy cash flow by highlighting which payments are delayed.

As you analyze this report, keep a watchful eye out for red flags such as an increasing number of late payments, particularly those that fall into the 60–90+ day range. Also, be cautious if your business is heavily reliant on a single customer with overdue invoices, as this poses a significant risk to your cash flow stability.

Balance Sheet

A Balance Sheet provides a snapshot of your business’s assets, liabilities, and equity at a particular point in time. This report is instrumental in assessing your company's financial stability and making informed decisions about potential growth or risk.

As you delve into your balance sheet, pay attention to red flags like a shrinking cash balance without clear reasons, rising debt not accompanied by income growth, or negative—or shrinking—owner equity. These indicators may suggest financial health issues that require immediate attention.

Income Statement (Profit and Loss Statement)

The Income Statement, often referred to as the Profit and Loss Statement, summarizes your business's income and expenses over a specific period. By reviewing this report, you can gain insights into profitability, cost control, and budgeting, helping guide investment strategies.

Key points to watch for include decreasing profit margins, a sudden and unexplained rise in operating expenses, and persistent losses despite steady sales. Such trends might indicate issues with underpricing, high overhead costs, or factors affecting pricing strategies.

Taking charge of your business's financial health requires consistent review of these essential reports. Address red flags promptly and take note of trends that can affect growth. For personalized support with bookkeeping or payroll queries, consider reaching out to expert advisors who can guide you in optimizing your financial processes.