How to Review Your P&L and Balance Sheet Each Month
Your Profit & Loss (P&L) and Balance Sheet aren’t just documents your CPA glances at once a year – they’re monthly scorecards that reveal the health of your business. When reviewed regularly, they help you catch problems early, control expenses, and plan with confidence. This blog will walk you through how to read and review these reports effectively each month.
Download Our Free Brochure →Start with the Profit & Loss (P&L) Statement
Also known as the income statement, the P&L shows your revenue, expenses, and net income over a defined period.
What to look for:
- Revenue Trends: Is your income growing, flat, or dropping? Compare this month to prior months.
- Expense Spikes: Any unusual jumps in expenses? Check categories like payroll, subscriptions, or advertising.
- Net Profit Margin: Are you making more money than you’re spending? If your profit is shrinking, investigate.
Pro Tip: Run the P&L with both “This Month” and “Year-to-Date” columns to see the bigger picture.
Move on to the Balance Sheet
The Balance Sheet gives a snapshot of your business’s financial position at a single point in time.
Key areas to review:
- Cash Balance: Is your cash increasing or decreasing month-over-month?
- Accounts Receivable: Do you have too much unpaid revenue sitting in A/R?
- Liabilities: Are your credit cards or loan balances increasing?
- Equity: Has your retained earnings changed significantly?
Red Flags:
- Negative cash balance
- Large, growing accounts payable
- Retained earnings dropping without explanation
Real-World Example
A marketing agency reviewed its P&L and Balance Sheet monthly and discovered recurring software fees had doubled – and they were still being billed for tools no longer used. After canceling redundant subscriptions and reworking their budget, they saved $6,000 annually.
Why Monthly Reviews Matter
Waiting until year-end to review reports often means missed opportunities or undetected problems. By reviewing your P&L and Balance Sheet monthly, you stay in control of:
Download Our Free Brochure →- Profitability
- Cash flow
- Debt levels
- Budget performance
- Tax liability projections
Don’t wait for your accountant to tell you how your business is doing.
With RemoteBooksOnline, we’ll generate and review your monthly financials so you can take action in real time.
Start your monthly bookkeeping plan today.
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FAQs
What’s the difference between the P&L and the Balance Sheet?
The P&L shows income and expenses over time; the Balance Sheet shows your financial position at a single moment.
How often should I review financial statements?
At least once a month. Regular reviews help you manage cash flow and catch errors early.
Can you explain the reports if I don’t understand them?
Yes. Our team provides monthly summaries and is happy to walk you through your reports.
Do I need accounting software to generate these?
Not necessarily. We use QuickBooks, but we’ll generate the reports for you regardless of the platform.
When you understand your reports, you understand your business.
Let RemoteBooksOnline help you stay on top of your P&L and Balance Sheet – every single month.
