What Should Be in Your Monthly Financial Review (That Most Business Owners Skip)
As a business owner, it’s tempting to use your bank balance as your main financial guide. After all, if there’s cash in the account, things must be fine… right?
Not quite.
Relying solely on your bank balance is like trying to drive a car by looking only at the fuel gauge. Sure, you know how much gas you have — but what about your speed, direction, and warning lights?
That’s where a proper monthly financial review comes in. It gives you a clear, structured overview of your business's financial health — empowering you to make smarter decisions, catch problems early, and ultimately become more profitable.
And yet, most small business owners skip this entirely. Or if they do attempt it, they glance at a profit & loss report and call it good — missing out on deeper insights that could transform their growth trajectory.
In this article, you’ll learn exactly what should be in your monthly review, why it matters, and how to make it simple, actionable, and consistent — even if you hate numbers.
Why a Monthly Financial Review Is Non-Negotiable
Let’s start with the “why.”
A monthly financial review:
Increases profitability by helping you spot leaks and optimize margins
Improves cash flow by tracking when money’s coming in and out
Prevents tax-time chaos by keeping your books clean all year
Supports better decisions by grounding them in data, not emotion
Builds investor/lender confidence by showing you’re financially organized
Whether you're a solopreneur or leading a growing team, reviewing your numbers regularly is one of the most powerful habits you can develop.
Now let’s break down what that actually looks like.
1. Profit & Loss (P&L) Review: Your Financial Report Card
The Profit & Loss (also called an Income Statement) is the backbone of your review. It shows how much money came in, how much went out, and what’s left over.
At a glance, here’s what to look at:
Revenue Trends
Is your income increasing or decreasing month over month?
Are there new streams of revenue growing?
Did any product or service line perform better than others?
👉 Action Tip: Compare this month to last month and the same month last year. If you see patterns, dig into them. Is growth tied to a new offer? Did sales dip because of seasonality or a marketing gap?
Expenses Breakdown
Are expenses increasing faster than revenue?
Are there any surprise spikes?
Can any costs be cut, outsourced, or optimized?
👉 Action Tip: Categorize expenses into buckets (marketing, software, contractors, overhead, etc.). If one category seems bloated, investigate further.
Net Profit (aka the Bottom Line)
This is what you’re left with after all expenses.
Is your net profit margin (Net Profit ÷ Revenue) healthy?
Is it trending up or down?
Are you paying yourself from profits or just hoping there’s money left?
👉 Rule of Thumb: For service businesses, aim for 20–30% net profit. For product-based businesses, 10–15% is common after COGS (Cost of Goods Sold).
2. Gross Profit Margin: The Hidden Growth Lever
Most business owners skip this metric — and it’s a mistake.
What is Gross Profit Margin?
Gross Profit = Revenue – Cost of Goods Sold (COGS)
Gross Profit Margin = Gross Profit ÷ Revenue
COGS are the direct costs of delivering your product or service. For example:
A coach may include subcontractor hours and materials
A retailer includes product costs and shipping
A web designer includes contracted developers and tools used on a per-project basis
Why it matters: If your gross margin is shrinking, you’re keeping less of every dollar earned — even if revenue is growing.
Questions to Ask:
Are my prices too low compared to delivery costs?
Can I renegotiate vendor or supplier rates?
Are too many extras being included without charging more?
👉 Action Tip: Track gross margin every month. If it starts slipping, that’s your cue to reprice, repackage, or reallocate resources.
3. Expense Patterns and Hidden Waste
Every business has expense bloat — and it usually creeps in silently.
That’s why each monthly review should include a line-by-line review of expenses. Not every single line — but at least your top 10 largest costs and a scan of all categories.
Common Problem Areas:
Duplicate software subscriptions
Old tools no longer in use
Services you’re paying for but not using
Ongoing fees from vendors you forgot to cancel
Ads or marketing services without a clear ROI
What to Look For:
Unexpected spikes: Did a cost double suddenly?
Recurring fees: Are they still needed?
Discretionary costs: Are there things you can pause, downgrade, or eliminate?
👉 Action Tip: Highlight one or two expenses to cut or renegotiate each month. This can free up hundreds — sometimes thousands — over the course of a year.
4. Accounts Receivable and Accounts Payable: Cash Flow Control
Many profitable businesses still go under because they run out of cash. Why? Poor management of Accounts Receivable (A/R) and Accounts Payable (A/P).
Accounts Receivable: Who Owes You Money?
This is money that’s been invoiced but hasn’t come in yet.
Ask:
Who’s overdue?
How many days late are they?
Is this a pattern with a certain client?
👉 Action Tip: Use aging reports to flag invoices over 30 days past due. Set up automatic reminders or a follow-up system — even a simple Google Sheet will do.
Accounts Payable: Who Do You Owe?
This includes unpaid bills, upcoming charges, and payment plans.
Ask:
What’s due in the next 15–30 days?
Do I have enough cash on hand to cover this?
Can I pay early for a discount or delay a payment without penalty?
👉 Action Tip: Create a weekly cash flow forecast to see your expected inflows vs. outflows. This helps prevent panic and supports smart timing of purchases.
5. Balance Sheet Snapshot: The Stability Check
While your P&L shows performance, your Balance Sheet shows the long-term picture.
It includes:
Assets (cash, accounts receivable, inventory, equipment)
Liabilities (credit cards, loans, unpaid bills)
Equity (your stake in the business)
Questions to ask each month:
Is my debt increasing or decreasing?
Are my assets growing?
Is my owner’s equity increasing or stagnant?
👉 Action Tip: Look at the current ratio (Current Assets ÷ Current Liabilities). A ratio above 1.2 is generally a sign of healthy short-term liquidity.
6. Owner's Pay and Tax Planning
Too many business owners pay themselves “whatever’s left.” That’s a recipe for burnout — and tax season panic.
Make sure you’re:
Paying yourself a regular draw or salary
Setting aside 25–35% of profits for taxes (if not using an S Corp strategy)
Allocating enough to reinvest in the business
👉 Action Tip: Use a separate savings account for taxes. Move a % of each month’s profit into it, so you’re never caught off guard.
7. Custom KPIs: Your Personal Dashboard
Your business is unique — and your review should reflect that. Think beyond standard reports and build a dashboard with custom Key Performance Indicators (KPIs).
Some examples:
Client acquisition cost
Lifetime value of a customer
Revenue per employee
Churn rate (if subscription-based)
Time to collect A/R
👉 Action Tip: Choose 2–3 KPIs that reflect your biggest priorities right now. Track them monthly to see if you’re moving in the right direction.
8. Month-End Checklist: Wrap-Up and Next Steps
Once you’ve gone through all of the above, spend 10–15 minutes documenting:
Wins: What went well financially?
Losses: What didn’t?
Action Steps: What needs to change next month?
Then, either send a summary to your team, keep it in your files, or go over it with your bookkeeper or coach.
👉 Action Tip: Use a simple template for this. Even a Google Doc with the same questions each month works beautifully.
How to Make This Easy and Repeatable
Yes, this sounds like a lot — but you don’t have to do it alone, and it gets easier with time.
Here’s how to simplify the process:
Use bookkeeping software like QuickBooks, Xero, or Wave
Hire a bookkeeper to keep your books current so you’re not behind [By the way, it would bring me joy to be able to do your bookkeeping for you and make sure your accounting system is optimized! Find out more here]
Set a recurring calendar appointment — ideally during the first week of each month
Use templates or checklists so you’re not reinventing the wheel
Bonus: If your books are up-to-date and reviewed monthly, your year-end taxes become a breeze — saving you time, money, and stress.
Final Thoughts
Taking control of your business finances doesn’t mean becoming an accountant — but it does mean committing to regular, intentional reviews of your money.
Your monthly financial review is more than a numbers exercise. It’s a business leadership habit — and one that separates stressed-out entrepreneurs from strategic CEOs.
Start simple. Stay consistent. And watch your clarity, confidence, and cash flow grow month after month.
