10 Things Every Business Owner Should Review Before Closing the Month

By ProfitWise - a Visa Business Plans company 

A business owner once told us, “I look at my numbers all the time.”

When we asked what he looked at, his answer was pretty simple: his bank account and his monthly sales.

He wasn’t unusual. Those are probably the two numbers most business owners watch most closely. The problem is that they only tell you part of what’s happening.

That’s why we encourage our clients to spend a little time at the end of every month reviewing the business before moving on to the next one. It doesn’t need to become a three-hour accounting meeting. You simply want to understand what happened while it’s still recent enough to do something about it.

Here are 10 things worth reviewing.

1. Revenue

Start with the obvious. How much did you sell this month, and how does that compare with the previous few months?

Don’t stop at whether revenue went up or down. If something changed significantly, try to understand why. Maybe you gained a large customer, lost one, raised prices, or simply had an unusually strong month. Knowing what caused the change is much more useful than knowing the percentage.

2. Profit

Once you know what came in, look at what was left.

A business can have a great sales month and still make less money than it did before. If revenue increased by 15% while expenses increased by 25%, that’s something you want to understand now rather than six months from now.

3. Cash

Next, look at your actual cash position.

How much money is available today, and what large payments are coming up? Payroll, rent, taxes, loan payments, and vendor bills can change that bank balance quickly.

This is where many owners get caught off guard. Profit and cash are related, but they aren’t the same thing.

4. Accounts Receivable

If customers owe you money, review who hasn’t paid.

An invoice that’s a few days late may mean nothing. One that’s been sitting there for 60 or 90 days deserves attention. The longer you wait to follow up, the harder it can become to collect.

5. Accounts Payable

Now look in the other direction. What do you owe?

Knowing what’s due over the next few weeks helps you manage cash instead of reacting when bills arrive.

6. Payroll

Payroll is often one of a company’s largest expenses, so changes here matter.

Maybe overtime has been creeping up, you added employees, or payroll is simply growing faster than revenue. A monthly review gives you a chance to spot the change and understand what’s behind it.

7. Unusual Expenses

This is one of our favorite things to look for.

If an expense is noticeably higher than usual, find out why. Sometimes there’s a perfectly reasonable explanation. Other times you’ll discover a duplicate charge, a subscription nobody uses anymore, an expense in the wrong category, or something else worth correcting.

8. Debt

Take a quick look at loans, credit cards, and other balances. You want to know whether debt is coming down as expected or quietly moving in the opposite direction.

This becomes especially important when credit cards are being used to cover regular operating expenses.

9. Your Balance Sheet

A lot of owners look at their profit and loss statement and ignore the balance sheet.

Don’t.

The balance sheet shows what the business owns, what it owes and what has accumulated over time. If something looks strange or you don’t understand an account, ask about it. A balance sheet shouldn’t be a report you receive every month but never read.

10. Anything That Doesn’t Make Sense

This may be the most important one.

If a number looks wrong, ask why.

We do this constantly at ProfitWise. Our monthly conversations with clients aren’t simply about handing them financial reports. We go through what happened, identify anything unusual, and help them understand what the numbers are telling them about the business.

Sometimes the explanation takes thirty seconds. Sometimes that one strange number leads us to something that needs attention.

Either way, it’s much better to have that conversation now.

Twelve months is a long time to run a business without really knowing what’s happening. Reviewing these ten areas every month gives you twelve opportunities a year to spot something, ask a question and make a correction while there’s still time to make a difference.