3 Essential Bookkeeping Reports to Review Monthly

The world of business finances can seem daunting, especially when you're juggling multiple responsibilities as a business owner. Setting aside regular time each month to review critical financial reports can make all the difference. These reports are not just about avoiding potential problems; they can also highlight growth opportunities and inform better decision-making. Let's dive into the top three bookkeeping reports to prioritize.

Understand Your Profitability with the Income Statement

The Income Statement, often referred to as the Profit and Loss Statement, is a summary of your business's income and expenses over a specific period. Its primary purpose is to reveal your profitability and control over costs, making it an indispensable tool for budgeting and investment planning. Be vigilant if you notice decreasing profit margins, a sudden rise in operating expenses, or losses despite steady sales, which can indicate issues like underpricing or high overhead.

Monitor Your Cash Flow with the Accounts Receivable Aging Report

The Accounts Receivable Aging Report provides a breakdown of unpaid invoices categorized by the duration they've been outstanding. This report helps maintain healthy cash flow by highlighting payment delays. Red flags to watch out for include an increasing number of late payments, especially those in the 60–90+ day range, and an overdependence on a single customer with overdue invoices.

Assess Your Financial Stability with the Balance Sheet

The Balance Sheet offers a snapshot of your business's assets, liabilities, and equity. It is crucial for assessing financial stability and making informed decisions regarding growth or risk. Be aware of shrinking cash balances with unclear causes, rising debt without corresponding income growth, and negative or decreasing owner equity as these are potential red flags.

Taking charge of your business's financial health through consistent report review is imperative. By acting early on red flags and recognizing trends, you can protect and perhaps even enhance your business's growth. If you have any questions about bookkeeping or need support with payroll management, don't hesitate to reach out. We're here to help you navigate your financial journey.