Updated · Angel Wallace, Advanced QuickBooks ProAdvisor
A monthly financial report should answer three questions in plain words: what came in, what went out and what you kept. At minimum that means a profit and loss statement, a balance sheet and a short note on what changed since last month and what to watch next.
What is on a profit and loss statement?
The profit and loss statement, also called an income statement, lists your income at the top, your expenses below it and the difference at the bottom. For a service business, the useful version breaks income out by service or by where it came from, and groups expenses the way your tax preparer will want them.
- Income, by service or source: cleanings, walks, products, tips
- Direct costs: helpers, supplies used on jobs
- Overhead: insurance, phone, software, vehicle
- Net profit: what the business kept this month
What does a balance sheet tell me?
The balance sheet is a snapshot of what the business owns and owes on the last day of the month: cash in each account, money clients still owe you, card balances and loans. It is the report that shows whether the profit on paper is actually sitting in the bank.
The U.S. Small Business Administration puts it this way: "The balance sheet is the foundation of managing your finances. It operates as a snapshot of your business financials."
Why compare this month with last month?
One month on its own tells you very little. Next to last month, and next to the same month last year, it shows direction. A slow February is normal for many service businesses. A slow February that is slower than last year is worth a conversation.
What should the note say?
Two or three sentences in plain words. For example: income was up because two new weekly clients started, supplies were higher because you stocked up, and one client is past due. The note is what turns a report into something you can act on.
What if I don't understand my reports?
Then the report is not finished yet. A good bookkeeper explains the numbers until they make sense to you. One client, Katlyn Raymond of Sage Cleaning LLC, wrote this in a Google review:
"Angel is an outstanding bookkeeper who always goes above and beyond. She doesn't just manage our books, she takes the time to teach us how to understand them, with clear, detailed monthly reports that make our finances easy to follow."
What else can a monthly report include?
- Who owes you money and for how long
- Income by client, to see who your biggest clients are
- Mileage for the month, with the running total for the year
- Payments to each helper, for 1099 tracking
A monthly report is the simplest way to keep an eye on the business without becoming an accountant yourself.
