Review these metrics and reports each month to measure the
financial health and long-term outlook of your small business.
Especially when just starting out, small
business owners need to keep a close eye on the financial health of their
venture. Mature companies may decide to monitor financial and marketing reports
quarterly. But for small businesses, monthly reporting is often a more useful
way to measure success.
Monthly reporting can give you feedback on your
pricing, marketing promotions, employee productivity, and growth. With this
information, business owners can make better decisions around big purchases,
leveraging or repaying debt, and expanding to new locations or verticals.
1. Profit and loss (P&L) statement
Your P&L statement, also known as an
income statement, shows how much revenue was generated, the expenses incurred,
and the resulting profit or loss over the course of the month. For your
business to succeed, your revenue must exceed your expenses. Checking this report
each month can show you whether or not you’re on track to cover your costs and
generate profit.
Some business owners check this report quarterly;
but by regularly tracking your expenses and revenue, you can better understand
how small changes to your operations impact your financial success. If you are
incurring losses each month, that’s a sign that something big needs to change.
2. Balance sheet
A balance sheet lists your company’s
assets, liabilities (e.g., debts), and equity. Reviewing your balance sheet
monthly shows a snapshot of your company’s financial position at a particular
point in time.
“By comparing balance sheets from month-to-month and
year-to-year, you can identify trends and make more informed financial
decisions. You’ll also be able to monitor the key financial ratios that lenders
use to determine your company’s health: liquidity and leverage.” wrote Lendio.
3. Cash flow statement
Along with balance sheets, cash flow
statements are an important indicator of financial health. A cash flow
statement reveals your change in cash and cash equivalents from month to month.
It uses the cash basis of accounting and classifies cash flow into three major
categories: operating, investing, and financing.
If your cash flow is looking weak — e.g., you have
more cash going out than coming in — you may decide to get temporary financing
or cut expenses.
4. Accounts payable and accounts receivable
Keep tabs on your accounts payable (AP)
and accounts receivable (AR). These two reports tell you how much you owe and
are owed, respectively. Tracking your AP and AR helps with record-keeping,
managing cash flow, and compliance. Reconciling these two accounts monthly will
make sure no bills slip through the cracks and your customers and partners are
paying your business on time.
5. Marketing engagement
Monthly reviews aren’t limited to
financial reports—monitoring your marketing outreach is also important. See how
your social media campaigns have performed by checking the native analytics for
Facebook, Instagram, and any other channels you use to reach potential
customers. Google
Analytics and your email marketing tool can also give you
insight into what’s working and what isn’t.
6. Customer loyalty
Customer loyalty isn’t found in a single
report, but it’s worth compiling key metrics each month to understand whether
your business is retaining customers or simply churning new customers. Create a
report that summarizes key
indicators such as:
o Customer retention rate.
o Negative churn.
o Net Promoter Score®.( NPS can be termed as
a metric that measures a customer’s willingness to recommend a brand’s product
and services to their friends, family and colleagues.)
o Customer effort score.
o Referral
traffic.
o Social
media mentions.
Some of this data can
be found in your point-of-sale system or loyalty program. Other metrics can be
found in your marketing analytics. Since the cost of acquiring a new customer
is five times
higher than retaining an existing one, you want to keep tabs on
whether your customers have a good experience with your product or service.
Source: US Chamber of Commerce
Published
May 03, 2022 6 Monthly Reports Every Small Business Should Monitor
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