The Monthly Financial Reporting Package
Managing your company's accounting can be intimidating. As an owner, you desire to focus
your time on growing your business, not on your books. Yet, at Cathedral Consulting Group,
LLC we find that timely accurate financial information is the foundation for excellent business
management. This paper outlines the ideal monthly reporting package for the average small
business owner to utilize. We also discuss several options of financial software that you may
consider using.
The Monthly Financial Reporting Package
A monthly financial report allows management to make timely decisions regarding the business;
quarterly or year-end statements do not allow management to correct the course quickly enough
during the year.
The three fundamental financial statements that every private company should utilize on a
monthly basis are: 1) Income Statement, 2) Balance Sheet (Beginning and Ending), and 3)
Cash Flow Statement. The Owner’s Equity Statement, showing changes in shareholders’
interests over time, is not necessary for a private company. For a deeper understanding of
financial statements and how they work together to reflect business operations, please see the
Resource section of Cathedral’s website.
Income Statement:
For the Income Statement (IS), it is useful to review the current month against Budget, Prior
Month Actual, and Prior Year actual. These reports give a full perspective of the current
business activity. Reviewing the IS against budget allows us to see how we are comparing to
what was anticipated, and to make immediate decisions to change or improve financial results
going forward. Comparing the IS to prior month, we see the trend of current circumstances. For
example, is business up or down from the prior month. Comparing the prior year, we see the
current month against the same time period. This is particularly useful in businesses. If July is
always a slow month, and revenues are still up from the prior year, even if they are down from
the prior month, we recognize that the business is doing well. It is also useful to look at the prior
12 months trend to get a larger perspective.
Within the IS it is useful to have each line item as a percentage of sales. This helps to monitor
whether items are increasing or decreasing over all compared to sales. For example, if sales
are decreasing the expenses, particularly Cost of Goods Sold (COGS) should be decreasing as
well. Of particular importance is monitoring the following percentages: COGS, Gross Margin,
Total Expenses, and Net Profit.
Balance Sheet:
In order to reconcile the validity of the Statements, a Beginning and Ending Balance Sheet must
be produced. It is useful if these Balance Sheets can be on the same page to allow easy
comparison. The inclusion of notes is also important. Of note should be that the cash was
reconciled to the bank statement on a particular date.
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Cash Flow Statement:
Although the Cash Flow Statement is not utilized by many small businesses, it is critical to tying
together the Balance Sheets and Income Statement. This statement reflects what has taken
place between the Beginning and Ending Balance Sheets. And since cash is king, it shows us
exactly how much cash is available.
Ratios:
While your industry may have some specific ratios to watch carefully on a monthly basis, there
are several key ratios that we recommend be monitored. Creating a dashboard that displays key
ratios from your financial statements on a daily or weekly basis allows instant monitoring of the
business. Cathedral’s paper on Ratios available free on our website explains their purpose and
how to calculate them for your business.
Attached to this document is a sample monthly financial report package which includes the
following:
1. Profit and Loss Statement – Actual vs. Budget for Current Period
2. Profit and Loss Statement – Current Period vs. Prior Period, Prior Year Period, YTD, and
as a percentage of sales.
3. Balance Sheet – Beginning and Ending of Period
4. Cash Flow Statement – Current Period
5. Accounts Receivable Aging Summary
6. Accounts Payable Aging Summary
7. Income & Expense Graph
Please note that this sample company, Rock Castle Construction, has a fiscal year that begins
October 1.
Small Business Accounting Software
In compiling financial statements, most small businesses use an accounting software. However,
in start-up stages some cost conscious entrepreneurs choose to design a financial system in
Excel and cobble it with other online programs. The key is that the system needs to produce
timely reports so that management can make informed decisions for the company.
There are many resources available online describing the pros and cons of certain software
options to generate these financial statements. The range of accounting software products
available for small and mid-sized businesses continues to grow. An article by Elizabeth
Wasserman in the Dec 1, 2009 issue of Inc.com provides a nice overview of the type of financial
software products currently available. In addition, TopTenReviews.com provides an extremely
detailed chart with product comparisons from price to reports available to backup/reconciliation.
Regardless, it is important to note that each industry also has industry-specific software that is
often available. However, those programs are often weak on the financial reporting capabilities
and may need some custom reports added to complete the financials.
Many small businesses have chosen to use Intuit software. Sometimes this begins with the
Quicken Home & Business edition since it is substantially cheaper than the full QuickBooks.
QuickBooks is the most commonly used financial software for small businesses. It is a fairly
easy to use software program, but as in all programs, the quality of output is contingent on the
accuracy of data inputs. A lack of knowledge regarding accounting can cause inaccuracy of
inputs, thereby creating unreliable reports. Particularly in the initial stages of software use, a
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class or other training is highly recommended if the small business owner intends to do the
bookkeeping themselves.
As we continue the migration to cloud computing, we anticipate that more financial software
programs will be available online, thus providing access to data 24/7. Most of the popular
software programs have an online version. QuickBooks also offers a free version that has
limited capabilities for up to 20 customer accounts.
As a small business grows, the level of financial outputs for management decision making also
increases. This often causes businesses to migrate to a more advanced accounting software
such as Peachtree Accounting or an industry specific program. Whereas in QuickBooks entries
entered incorrectly can easily be erased, a more advanced accounting software requires full
accountability through reversal of incorrect entries. Other popular advanced options include
Cougar Mountain Software and MYOB Accounting.1
As businesses grow and seek full integration, it may be advantageous to move into a full
business management software that integrates a financial module. These tend to be higherpriced and include such functions as point of sale, inventory control, customer relationship
management (CRM), billing, purchasing and even enterprise resource management (ERP).
Some popular picks in this category include Everest's Business Management Software, which
integrates all business processes into one solution, and NetSuite -- the latter of which boasts
that it's “everything you need in one powerful solution.”
Regardless of the financial software that you choose to use, the accuracy of data and the
regular review of reports remain the most critical factors to good management decision making.
And it is also helpful if your accountant is familiar with the software you choose to utilize.
Articles for Further Reading
1. Wasserman, Elizabeth. “How to Choose Business Accounting Software.”
http://www.inc.com/guides/choosing-accounting-software.html. 01 December 2009.
2. “Accounting Software Review.” http://accounting-software-review.toptenreviews.com/
3. Dahl, Darren. “How to Track Your Company's Critical Numbers.”
http://www.inc.com/guides/tracking-critical-numbers.html. Feb 19, 2010.
4. Campbell, Anita. “Drive Business with a Software Dashboard.”
http://technology.inc.com/software/articles/200808/campbell.html
5. Newman, Pam. “Financial Fundamentals.”
http://www.entrepreneur.com/money/moneymanagement/financialmanagementcolumnist
pamnewman/article159786.html. April 10, 2006.
Philip Clements is the Chief Executive Officer of Cathedral Consulting Group, LLC and Managing
Director in the New York Office. Sharon Nolt and Michelle Fitzgerald are former Senior Associates in the
New York Office.
For more information, please visit Cathedral Consulting Group LLC online at
www.cathedralconsulting.com or contact us at info@cathedralconsulting.com.
1
Wasserman, Elizabeth. “How to Choose Business Accounting Software.” http://www.inc.com/guides/choosing-accountingsoftware.html. 01 December 2009.
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