Quick answer: Every month, a business owner should review the profit and loss statement, the balance sheet, the statement of cash flows, and the accounts receivable and accounts payable aging reports. Read together and compared against the prior month and prior year, these five reports tell you whether you are making money, where your cash went, and what problems are building before they become expensive.
Many owners we meet look at two numbers: sales and the bank balance. Both matter, but neither tells the whole story. After more than three decades preparing and reviewing financial statements, we can say that most surprises a business owner faces were sitting in the reports for months. Somebody just was not reading them. A focused 30 to 45 minutes each month is usually enough.
The profit and loss statement
The profit and loss statement, also called the income statement, shows revenue, costs, and expenses for a period. It answers the question "Did we make money?"
What to look for:
- Gross margin percentage. Revenue minus direct costs, divided by revenue. A slipping margin often means pricing has not kept up with material or labor costs.
- Expense lines that jumped. Compare each line to last month and to the same month last year. Ask about anything that moved more than you expected.
- Year-to-date versus budget. If you have a budget, this is where you see whether the year is on track.
Ask for the statement in a comparative format: current month, same month last year, year to date, and prior year to date side by side. A single column of numbers tells you very little.
The balance sheet
The balance sheet is a snapshot of what the business owns, what it owes, and what is left for the owners on a single date. Owners skip it more than any other report, and that is a mistake.
What to look for:
- Cash compared to last month and to your minimum comfortable balance
- Accounts receivable growing faster than sales, which suggests customers are paying slower
- Inventory creeping up, which ties up cash and can hide obsolete stock
- Current liabilities such as payroll taxes, sales tax, and credit cards, which should be paid down regularly, not accumulating
- Debt balances that match your loan statements
- Strange or stale balances in accounts like "ask my accountant," suspense, or undeposited funds
If the balance sheet does not tie to bank statements, loan statements, and tax account balances, the books are not finished. Reconciling those accounts every month is what makes a balance sheet trustworthy.
The statement of cash flows
The statement of cash flows explains why your cash balance changed. It divides activity into three groups: operations, investing (such as equipment purchases), and financing (such as loan proceeds, loan payments, and owner draws).
This report answers the question owners ask most often: "We were profitable this quarter, so where did the money go?" The answer is usually right there, in a growing receivables balance, an equipment purchase, principal payments on a loan, or distributions.
If your accounting software does not produce a clean statement of cash flows, that is often a sign that transactions are being categorized inconsistently.
Receivables and payables aging reports
Aging reports list who owes you money and whom you owe, sorted by how long each balance has been outstanding.
For accounts receivable, watch:
- Total balances over 60 and 90 days
- Any single customer whose balance keeps growing
- Old small balances that should be collected or written off
For accounts payable, watch:
- Bills past due that could damage supplier relationships or trigger late fees
- Whether you are paying too early and giving up cash you could keep a little longer
These two reports feed directly into a cash flow forecast, which is the natural next step once you trust your numbers.
A simple monthly review routine
Here is a routine that works for most small and mid-sized businesses:
- Get the reports by a set date each month, ideally within two or three weeks of month end.
- Start with the balance sheet: cash, receivables, inventory, and liabilities.
- Move to the profit and loss statement and note any surprises.
- Read the statement of cash flows to connect the two.
- Scan the aging reports and flag customers or vendors needing attention.
- Write down three questions and get them answered before the next month.
That last step is what turns reading into managing. If nobody can answer your questions, it may be time for help from someone who can. Many Central New York owners use our controller and CFO services for exactly that monthly review.
Signs your financial statements need attention
Reports are only useful if they are accurate. Warning signs include:
- Statements that arrive months late or only at tax time
- Large balances in miscellaneous or uncategorized accounts
- Bank accounts that have not been reconciled
- Gross margins that swing wildly from month to month with no business reason
- Numbers that do not match what your tax preparer reports at year end
Any of these suggests the books need cleanup before you rely on them for decisions.
Frequently asked questions
Which financial statement is most important for a small business owner?
There is no single most important one, because each answers a different question. If you had to pick, the balance sheet is the most underused and often the most revealing. Still, reading the profit and loss statement and balance sheet together gives you far more insight than either alone.
How soon after month end should I get my financial statements?
A good target for a small or mid-sized business is within 10 to 20 business days of month end. Statements that arrive two months late are history, not management tools.
What is a comparative financial statement?
It is a report that shows two or more periods side by side, such as this month and the same month last year. Comparisons make trends and unusual changes jump out, so it is the format we recommend for every monthly review.
Do I need a statement of cash flows if I already watch my bank balance?
Yes. Your bank balance tells you where you stand today. The statement of cash flows tells you why it changed, which helps you decide what to do about it.
This article is general information for 2026, not tax or legal advice for your situation. Tax rules and figures change; confirm current amounts with the IRS, New York State, or your accountant before acting.
Related service: Controller & CFO Services