How to run a monthly financial review (solo or with a team)

Whether you’re a startup founder, solo operator, or small business owner, running a monthly financial review can seem like an overly complicated task reserved for large corporations. But the truth is, if you want to get clear on your company’s finances, stay in control of budgets, and steer your business more intentionally, you’ve got to run a financial review each month. 

Monthly financial reviews offer much-needed insight into company performance and shed light on possible upcoming financial obstacles. They also help you spot trends early and improve your ability to make strategic business decisions. 

Here, we’ll show you what to look for in your monthly financial review, so you can build a simple, repeatable process that prioritizes action over complexity. Whether you’re going at it alone, with a partner, or with a team, you’ll learn how to build strategic intuition to run your business more confidently and effectively.

If you’re running a startup or small business, you’re likely feeling pulled in several directions at once while trying to keep everything moving. So, why add another task to your plate? Here are four key reasons why taking the time to run a monthly financial review is worth the effort. 

1. Staying ahead of potential cash flow issues

If you’re not actively monitoring your inflows and outflows each month, you may not be able to spot upcoming shortfalls that could leave you scrambling. If your receivables are slow or your expenses suddenly spike, for example, a monthly financial review will highlight these issues, so you can speed up collections or adjust payment terms, as needed. 

2. Pinpointing trends early

Trends — like rising supplier costs, higher customer churn, and seasonal dips — become clear when you’re running a monthly financial review. The benefit of noticing them early is that you have an opportunity to make a change and turn things around. This could mean  shifting marketing spend or offering a sales promo. 

3. Building decision-making skills

If you have a tendency to go with your gut, that approach may have gotten you pretty far in business. But, if you want to take your success to the next level, you’ve got to trust real numbers, too, like your profit margin and cash reports. These help you confidently make decisions rooted in metrics, rather than intuition alone. 

4. Growing your financial muscle

Effective forecasting and budgeting are learned skills, and you can improve your financial abilities with a little practice. Reviewing your financials monthly will help you become more familiar with the metrics that move the needle for your business.

Not everyone knows how to review monthly financial statements, and that’s nothing to be worried about. After all, when you’re in the weeds of running your business, you’ve got a lot on your mind. 

We’ve put together a monthly financial review checklist to guide you as you delve into the finances.

1. Cash flow and liquidity

Look at your cash flow statement to see how much money is moving in and out during the month. Check your bank balances to see if the cash on hand can cover the next rent payment, taxes, and payroll, as well as other upcoming bills. You may also want to track your runway so you know how many months you have of operating cash at the current burn rate.

2. Accounts receivable and payable

Pay special attention to your accounts receivable to determine if you’ve got any overdue invoices, so you can nudge delinquent payers. Also, review your accounts payable to make sure you can pay on time to avoid any late fees.

3. Profit and loss

Look at revenue by product or service, so you can see what’s selling and what’s not resonating with customers. Review your gross margin, which will tell you if the cost of goods is rising (and if margins are slipping). You’ll also want to compare your last month’s operating expenses to this month’s to see how your expenses are trending. How is your bottom line (net profit), and is it supporting your business goals?

4. Budget vs. actuals

Were there any budget variances this month? If so, determine where you overspent or underspent — and why. When it comes to forecasting for next month, adjust your plan based on what took place in the current month.

5. Balance sheet

Pay special attention to three key areas: your debt levels (like loans and credit cards), inventory (is your stock tying up cash?), and equity (are your earnings growing or shrinking?). This will show you the financial strength of your business.

7. Key performance indicators (KPIs)

Consider which metrics matter most to your business. Some important customer-focused KPIs to keep an eye on include customer acquisition cost and average sale size.

8. Taxes

Each month, look at the sales tax and payroll tax you’ve set aside and ensure you’ve reserved the correct amount. Be aware of upcoming filing deadlines, so you’re not caught off guard.

The way you run a monthly financial review will depend on whether you’re going at it alone, with a partner, or with a team. Here’s what to focus on: 

• Solo founder: Use the review to focus on learning more about the financial ins and outs of your business and determining whether your financial health is alignmed with your business goals. Focus on trends, rather than straight numbers.
• Co-founder: Sync with your business partner each month to make sure KPIs are on track and that you’re both aware of big changes coming up in the next few months. The last thing you’ll want is for one of you to be caught by surprise.
• With a team: Instead of sharing raw data with your team, use this time to deliver insights. This means you’ll have to do a bit of prep beforehand to understand the trends and figure out the related business decisions and action items.

From time to time, you may end up feeling frustrated during one of your monthly financial reviews. Here are some common pitfalls to steer clear of: 

• Getting lost in the weeds: Yes, the details matter. However, don’t forget the bigger picture. Always keep one eye on the long-term performance of your business. 
• Forgetting context: Numbers always come with a story. For example, plummeting sales one month could be as a result of seasonal changes, not customers suddenly losing interest in your business. 
• Not taking notes: This may seem like a small thing, but writing down insights, important context, and next steps is key. You risk forgetting action items or key business decisions if they only exist in your head. 
• Being inconsistent: Monthly reviews need to happen monthly. Avoid skipping months, even if you’re busier than usual. Doing so can mean you’re making business decisions without important context. Add the monthly review in your calendar as a mandatory event.

As you complete financial reviews month after month, you’ll glean insights about your business from the raw data. Don’t stop there. Insights are well and good, but it’s vital to turn those insights into action. 

After each meeting, identify one to three takeaways or decisions you’ve made from the insights. For example, if you noted that some customers are slowing down your accounts receivable, an action item may be to set up automated email reminders for overdue invoices. 

Track each action item or decision in a shared document or a platform (like Notion), so that everyone on your team can monitor progress and hold stakeholders accountable.

You don’t need to be a CFO to run a solid monthly financial review. With the right tools and guidance, you can uncover insights about your business’ financial health and  use them to steer your company in the right direction. 

Whether you’re managing your business on your own, with a partner, or with a team, Mercury helps you stay in control with banking and software to power all your financial workflows. With Mercury, you can: 

• Outpace your competitors. Efficiently store, monitor, and move funds with financial products and software that protect what you’re building, while moving at an accelerated pace. 
• Simplify financial workflows. Easily pay bills, stay in control of company spend, and speed up month-end close, all from your Mercury account. 
• Amplify your growth. Get access to financial products, resources, and knowledge to navigate the obstacles that come with scaling your business. 

Explore Mercury today and learn more about how you can transform the way you operate.