Growing service businesses often reach a point where checking the bank balance is no longer enough. Revenue may be increasing, more customers may be booking, payroll may be growing and several payment systems may be moving money through the business at the same time.
The financial reports should help make sense of that activity. The exact reports a business needs will depend on how it operates, but there are several reports that can give an owner a clearer picture of what is happening each month.
The important part is not simply receiving the reports. It is knowing what to look for and making sure the bookkeeping behind them is reliable.
1. Profit and Loss Statement
The profit and loss statement shows the income and expenses recorded over a particular period and helps the owner see how revenue, operating costs and overall profitability are changing.
A useful monthly review may include:
- Revenue compared with previous months
- Changes in payroll or contractor costs
- Expense categories that increased unexpectedly
- Operating costs growing faster than revenue
- Overall profit or loss for the period
Looking at trends is often more useful than looking at one month in isolation. A change may have a reasonable explanation, but the report gives the owner somewhere to begin asking questions.
2. Balance Sheet
The balance sheet shows the balances of assets, liabilities and equity at a specific point in time.
A monthly review may include:
- Bank and credit card balances
- Loans
- Accounts receivable and payable
- Customer deposits or other liabilities
- Payroll-related balances
- Owner activity
- Payment processor clearing accounts
For example, a clearing account that continues to grow may indicate that deposits, fees or payouts need closer review.
The balance sheet helps show what the business owns, what it owes and which balances may need a closer look.
3. Accounts Receivable Aging
For businesses that invoice customers, the accounts receivable aging report shows who still owes money and how long balances have been outstanding.
It can help identify overdue invoices, slow-paying customers, unapplied payments or old balances that need attention.
A business may show strong revenue while still experiencing cash pressure if customers are slow to pay.
If the business does not invoice customers, this report may not be relevant, which is why monthly reporting should reflect how the business actually operates.
4. Cash Position and Cash Flow Information
Profit and cash are not the same thing.
A business can report a profit while still feeling short on cash because money may be tied up in unpaid invoices, equipment purchases, loan payments or other obligations.
A monthly cash review can help the owner understand what cash is available, what major payments are coming up and whether the business is generating and using cash as expected.
It is also important to understand whether large deposits relate to current revenue or money received for work that is still to be completed.
Read more: Why Customer Deposits Are Not Always Immediate Income
5. Profitability by Service, Client, Job or Project
As a service business grows, total revenue becomes less useful on its own.
Depending on the business and the way its bookkeeping is structured, management may want to review performance by service, client, project, job, location or department.
This can help identify where costs are increasing, which work requires more resources than expected and which areas of the business are producing stronger results.
Not every business needs this level of detail. Reporting should be detailed enough to support decisions without becoming so complicated that it is difficult to maintain.
Read more: How to Track Profitability by Client or Project in QuickBooks
Reliable Reports Start With Reliable Bookkeeping
A polished financial report is not automatically an accurate one.
Reliable monthly reporting depends on properly maintained records, including reconciled bank and credit card accounts, consistent transaction coding, reviewed customer balances and properly recorded payment activity.
If the underlying bookkeeping has problems, the reports may also contain problems.
Read more: What a QuickBooks Cleanup Actually Includes
Keep the Monthly Review Practical
A monthly financial review does not need to be complicated. The owner should be able to look at the reports and understand what changed, which balances need attention, whether customers are paying, how cash is moving and whether parts of the business are performing differently than expected.
The goal is not to create more paperwork. It is to notice changes earlier and make decisions using financial information that can be trusted.
Where South Ridge Begins
South Ridge begins by understanding how the business operates, how money moves through its systems and what information the owner actually needs from monthly reporting.
When there appears to be a potential fit, a paid Financial Diagnostic may be recommended to identify reconciliation concerns, reporting gaps, unusual balances and opportunities for a clearer monthly process.
Learn about bookkeeping and financial support for growing local and service businesses
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Are Your Monthly Reports Giving You Useful Information?
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If there appears to be a strong mutual fit, a paid Financial Diagnostic may be recommended.
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