How to review your business finances monthly

Why a Monthly Financial Review is Your Business’s Best Friend

Think of a monthly financial review as a regular health check for your business. It might sound intimidating, but it’s one of the most powerful habits you can build. It’s not about being a maths whizz; it’s about understanding the story your numbers are telling you. Doing this each month helps you spot opportunities, fix problems before they grow, and make confident decisions to steer your business in the right direction.

What to Review: The Three Key Reports

Every month, you’ll want to look at three main things. If you've set up a bookkeeping system, getting this information should be straightforward.

1. Profit and Loss (P&L) Statement

What it is: This is a simple summary of your income (money in) minus your expenses (money out) over a specific period, usually the month. The result shows whether you made a profit or a loss.

What to look for:

• Is the business profitable this month? If not, why? Was it due to lower sales or a particularly large expense?
• How do sales compare to last month? Are they growing, shrinking, or staying flat?
• Are any costs creeping up? Keep an eye on your biggest expenses. Did your material costs increase? Did you spend more on marketing than planned?

2. Cash Flow

What it is: This tracks the actual cash moving in and out of your bank account. It’s different from profit because a sale made on credit is profit, but it isn’t cash until the customer pays you.

A business can be profitable on paper but fail because it runs out of cash to pay its bills. Cash is king!

What to look for:

• Do you have enough cash to cover next month’s bills? This is the most critical question. Look at your closing bank balance and your expected outgoings.
• Are customers paying you on time? If you have a lot of unpaid invoices, your cash flow will suffer.
• Where are the cash bottlenecks? Do you have big payments going out long before you get paid by your clients?

3. Budget vs. Actuals

What it is: This is a direct comparison of what you planned to spend versus what you actually spent during the month. It shows how well you are sticking to your financial plan.

What to look for:

• Where did you overspend? Identify which areas went over budget and understand why. Was it a one-off emergency or a recurring issue?
• Where did you underspend? This could be good news, but it might also mean you neglected an important area, like marketing.
• Does your budget need adjusting? Your review might show that your initial budget was unrealistic. It’s a living document, so you can tweak it based on what you learn.

Your Simple Monthly Review Checklist

Ready to get started? Follow these steps at the end of each month.

1. Block out time: Put an hour or two in your calendar. Make it a non-negotiable appointment with your business.
2. Gather your documents: Pull up your P&L statement, your cash flow report, and your budget from your accounting software or spreadsheet.
3. Review the P&L: Check your total income, total expenses, and your net profit. Make a note of anything that surprises you.
4. Analyse your cash flow: Look at your opening and closing bank balances. Are you in a stronger or weaker cash position than last month?
5. Compare budget to actuals: Go through your budget line by line and see how your actual spending compares.
6. Write down 3 key takeaways: What are the most important things you learned? For example: "Sales are up 10%", "Software costs were £50 over budget", or "Need to chase two big unpaid invoices".
7. Set actions for next month: Based on your takeaways, decide on concrete actions. This turns your review from a passive task into a powerful planning tool.

By making this a regular habit, you’ll move from simply running your business to truly being in control of it. You’ve got this!