Reviewing financial statements regularly, typically monthly, allows businesses to monitor their financial performance, understand key trends, and make informed decisions.

Primary Implication

A daily review of your Financial Statements is too frequent, while an annual review when taxes are filed will not help you.  Neither do quarterly reviews help you manage your business to make more money.

The sweet spot for reviewing the results of your business actions through your financial statements is monthly.  Your goal is to use the power of variance reports to confirm which actions are working, which aren’t, and what you need to do differently to realize your profit plan.

Overview

How often should I review my Financial Statements?

For most businesses, a monthly review of your financial statements is ideal.  This regular check-in helps you stay informed about your company’s financial performance and make timely adjustments as needed.

Building a Routine

Make reviewing your financial statements a routine practice, like a monthly health checkup for your business.  Schedule it during your regular management meetings to ensure it gets the attention it deserves.

Key Reports to Review

Each month, generate these reports from your accounting software:

• Income Statement (P&L):  Compare this month’s results to the same month last year to identify trends and changes.
• Variance to Plan Report:  See how your actual performance compares to your budget or profit plan.  This helps identify areas where you’re exceeding or falling short of expectations.
• Balance Sheet:  This snapshot of your assets, liabilities, and equity gives you an overview of your financial health at a specific point in time.

Connecting the Dots

By reviewing these reports together, you’ll start to see how they connect.  For example, your Income Statement explains the changes in your “Retained Earnings” (an important part of your Balance Sheet).  Understanding this connection helps you make smarter decisions about how you use your money to generate profit and build long-term financial wealth.