Up-to-date books are the start. The value comes when someone sits down with you each month and explains what the numbers say about your business.
For a growing company, that monthly conversation is often where the best decisions come from. Here is what it should cover, in about half an hour.
Before the review: the books are closed
A review is only as good as the numbers behind it. Before you meet, every bank, credit card, and loan account should be reconciled for the month, and every transaction categorized.
The checklist
1. Income, by type of work
How much came in from installs, service calls, maintenance, or whatever your lines are? Which grew, and which slipped, compared with last month and the same month last year?
2. Materials and labor
What did it cost to do the work? If gross profit fell, look here first: material prices, overtime, a job that ran long, or work priced too low.
3. Overhead
Did anything jump: insurance, vehicle repairs, software, advertising? These are the costs to look at first if things get tight.
4. Who owes you, and for how long
Look at unpaid invoices by age. Commercial customers often pay on terms, and a slow payer is easier to address at 30 days than at 90.
5. What you owe
Bills coming due, loan payments, and anything that will need cash soon.
6. Cash
How much is in the bank, what’s coming in, and what’s going out over the next month. A profitable month can still leave less cash, so look at both.
7. Questions and suggestions
Anything that looked unusual, any category that needs a decision, and two or three things to watch next month.
This month's review
Tick each one once you have covered it.
0 of 7 covered
Make it a habit
The review works best on the same week each month, with the same reports in the same order. After a few months, the owner starts to see patterns early: the slow season coming, a customer who always pays late, a type of work that pays better than the rest.
Frequently asked questions
About half an hour, once the books are closed and the reports are ready.
A profit and loss by month, compared with last month and last year; a balance sheet; unpaid invoices by age; and a short look at cash.
Usually not at first. For many growing companies, current books and a monthly review cover most of what they need.
Start with a conversation
If your books are current but nobody explains them to you, or they aren’t current yet, request a free consultation. Prefer to call? 781-924-1489.