Most small business owners know that monitoring their business's financial health using periodic financial reports or monthly financials is essential to managing and growing their business. However, many companies find it difficult to keep track of their financial health regularly and fail to recognize the signs of growing problems before it's too late to recover from them. So in this blog, we will be talking about the importance of monthly financials, what they look like, and what you should be paying attention to.
What Do Monthly Financials Include?
A monthly financial statement can provide vital information such as:
Revenue and Expenses: This information can help you understand where your money is coming from and going to and identify areas where you may be able to cut costs.
Assets and Liabilities: This will allow you to better understand your company's net worth and help you assess your financial risk.
Cash Flow: Tracking the inflow and outflow of cash in your business will help you identify potential problems with your cash flow.
Trends: Monitoring trends over time can help you spot potential problems early on and adjust your budget before they become too expensive.
Understand Your Numbers
Understanding your numbers is not just about meeting your financial goals but also about knowing the positives and negatives of your business performance. You can use monthly financials as a barometer for how well things are going. For example, if you see that the total cash amount is decreasing month after month, that could indicate that you need to tighten up on spending or change how you're generating income.
Measure Progress
Monthly financials can help you measure progress by looking at your net income, total revenue, and expenses. These numbers will give you a good idea of whether your business is moving in the right direction. If your net income and revenue increase, you know that your business is moving in the right direction and bringing in profits.
Make an Action Plan
By understanding your revenue and expenses, you can identify where you need to make changes to grow your business. Here are three steps to take based on your monthly financials:
Calculate the net income and net loss for the month. This will show how much money came in and how much money you spent on business expenses.
You can use this information to create a budget. As part of your budget, you also need to set monthly goals for yourself and take the necessary steps to hit them.
Prioritize which projects you should take on in the next month based on your budget plan. By knowing what's important, you'll be able to stay on track and progress toward your goals.
If you’re a business owner or a manager, keeping track of your finances should be a top priority. But it can be hard to find time with all the other stuff you have to do. That's where Mountain Top Bookkeeping comes in. We can help you stay on top of your monthly financials and get an accurate picture of your business’s financial health, so you can make the necessary changes to improve it. Get in touch with us now to learn more about how we can help you.