What to include in a monthly financial report

Five sections, one page. Each one answers a question owners ask.

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1. Cash today and the lowest point ahead

Start with cash, because cash is what runs out. Show the bank balance today. Then show the lowest the balance will get over the next 13 weeks, and which week that is.

Watch the lowest point first. A business can have $90,000 in the bank on the first and be short for payroll on the twentieth. Put that number next to the size of one payroll run, so the owner sees the risk in a second.

2. Profit against last month and last year

Show revenue, gross profit, overhead and net profit. Compare each to last month and to the same month last year. Last year is the key comparison for seasonal businesses. A slow January only worries you if last January was better.

Keep it to five lines. The full profit and loss stays in the books for anyone who wants the detail.

3. Where the profit went

This is the section most reports leave out, and the one owners need most. Start with net profit. Then subtract the places it went that do not show up as expenses. Customers paying slower than last month. Loan principal. Owner draws. Equipment bought. What is left is the change in cash.

When an owner says "we are profitable but I never have any money", this section shows exactly why.

4. A few numbers that warn early

Pick five or six numbers that move before profit does. For most service businesses these work well.

• Weeks of payroll in the bank
• Days customers take to pay
• Money owed for more than 60 days
• Share of revenue from your five biggest customers
• Gross margin
• Labor as a share of revenue

Show each one against last month. Watch the direction first.

5. What to do this month

End with two or three actions, one sentence each. If the report leads to no decision, it was a history lesson. "Collect the $21,500 over 60 days, largest accounts first" is an action. "Monitor receivables" is not.

What to leave out

• The full balance sheet. Pull out cash, what customers owe and debt. Leave the rest.
• Every expense line. Group them into labor and overhead.
• Ratios nobody acts on. If a number never changes a decision, drop it.
• Commentary that restates the numbers. The actions section replaces it.

Who should prepare it

Your bookkeeper closes the month and produces the profit and loss, the balance sheet and the list of what customers owe. Building the one-page report from those takes about an hour. The cash forecast in section 1 takes longer, which is why most small businesses skip it.