As a business owner, it’s essential to understand and review what monthly bookkeeping reports tell you about your business. Understanding the basics of these reports and reviewing them regularly will ensure you know where your business stands. It empowers you as the business owner to make critical business decisions with confidence.

Whether you are doing your bookkeeping or have tasked someone else with that responsibility, these are the basic reports to review monthly that can help keep your business moving forward.

General ledger

The general ledger is a high-level view of your spending. It includes a summary of debits and credits to help you keep track of spending in each account. Unbalanced ledgers lead to inaccuracies in your financial reports. These inaccuracies will lead to significant fiscal issues in the company. Hence, it’s vital that your ledger be accurate.

Your business’ general ledger is the foundation of your business bookkeeping. It allows you to sort and obtain summaries of your financial transactions at any given time.

The four main components of a general ledger (in the most common spreadsheet order from left to right) are:

• journal entries
• descriptions
• credits and debits
• balances

Profit and loss or income statement

Another critical bookkeeping report to review each month is the profit and loss statement. This is sometimes called the income statement or statement of operations. Its primary function is to subtract expenses from income. The profit and loss statement will tell you if you have made a loss or a profit for a specific period. Doing that helps your business stay on track financially throughout the year and assess whether you’re meeting your financial goals. This assessment helps you course correct throughout the year and avoid unpleasant surprises.

The main components of a profit and loss statement are:

• income
• expenses
• cost of goods sold
• net income

Balance sheet

A balance sheet is an overview of your financial stability. It is often confused with the income statement. This is the report that your company will provide to lenders when seeking a business loan. It’s also one that you can review monthly to see the complete picture of your company’s assets, equity, and liabilities.

Cash flow statements

Cash flow statements are monthly reports that summarize cash and cash equivalents coming into and out of your business accounts. Their purpose is to show two particular things, positive and negative cash flow.

Each cash flow statement should include operations (inflow from customers and outflow to operate the company), investments (stocks, property, or other long-term assets), and finances (inflow and outflow from dividends, debts, and loans).

Accounts payable and receivable

These ledgers are technically two different monthly reports to review, but they are often reviewed together. Accounts payable ledgers are the unmet payment obligations to vendors and suppliers, while accounts receivable is the amount owed to your company for products and/or services that have already been delivered.

Accounts payable is a liability, while accounts receivable is an asset. These representations of future inflows and future outflows are essential because they are pending transactions that will impact your business.

Earnings statement

They are beneficial because they illustrate where a business ebbs and flows. Reviewing this report can help you see and respond to trends in your industry.

For seasonal businesses, earnings statements can help business owners prepare for the offseason and ensure they have enough funds to sustain the business. For larger companies, these statements are generally provided to investors quarterly.

What monthly bookkeeping reports will tell you

Knowing the basics of these monthly reports and reviewing them regularly help you understand the financial health of your business. However, these reports are only helpful if the data is current for your business.

If you need help staying on top of your business bookkeeping, contact our team for more information about our services.