Financial surprises don’t usually come out of nowhere—they build slowly, then hit hard. Whether it’s an unexpected tax bill, a forgotten vendor payment, or cash drying up faster than planned, small business owners can avoid most of these problems with a consistent monthly review.
You don’t need to overcomplicate it. A short, focused checklist—supported by tools like small business accounting software—can help you catch errors early, understand where your money is going, and make smarter decisions with confidence. Here’s what every small business should review monthly to stay in control and avoid unpleasant surprises.
1. Reconcile Bank and Credit Card Accounts
Start each month by reconciling your business bank and credit card accounts. This means comparing your records against your bank statements to make sure every transaction is accounted for correctly. It’s one of the most effective ways to catch:
- Duplicate entries
- Missed transactions
- Bank errors
- Fraudulent activity
Doing this monthly prevents errors from piling up and makes year-end reporting and tax prep much easier. Some accounting software platforms offer built-in reconciliation tools that can save time and reduce manual work.
2. Overview Outstanding Customer Invoices
Unpaid invoices hurt your cash flow more than most expenses. Each month, look at your accounts receivable aging report. This report shows how long invoices have been outstanding and which customers owe you money.
Focus on:
- Invoices more than 30 days past due
- Customers with a history of late payments
- Any large balances nearing the 60- or 90-day mark
Follow up promptly with reminders. If slow payments are a regular issue, consider adjusting your payment terms, adding late fees, or requiring partial payment up front.
3. Review Unpaid Bills and Upcoming Expenses
Next, check your accounts payable. Knowing what you owe and when is critical to avoiding late fees, missed discounts, or strained vendor relationships.
Look for:
- Bills coming due in the next two weeks
- Recurring subscriptions or vendor charges
- Opportunities to negotiate payment terms
Paying attention to timing is key. If your revenue fluctuates, spacing out payments or setting aside cash for high-expense periods can keep things running smoothly.
4. Check Your Cash Flow
Your bank balance doesn’t tell the whole story. What matters is how much cash you’ll have after covering your upcoming expenses. That’s your true cash position or cash flow, and it’s what determines whether your business can meet its obligations in the short term.
Every month, review your:
- Current cash on hand
- Projected income for the next 30 days
- Known upcoming expenses (like payroll, rent, or taxes)
If your margins are tight or your cash flow is inconsistent, try building a simple 4–8 week forecast. It can be as basic as a spreadsheet listing what you expect to bring in and what you expect to spend. Even a rough plan helps you avoid shortfalls and make better timing decisions.
5. Compare Your Budget to Actual Spending
If you’ve created a monthly or quarterly budget, don’t let it sit unused. Compare your actual income and expenses to your budgeted figures.
Focus on:
- Categories where spending exceeded your plan
- Revenue shortfalls or overperformance
- Areas where you’ve consistently been off target
Adjust future budgets based on what you’re learning now. If you’re not using a formal budget, compare current spending to the same month last year for a rough benchmark.
6. Review Your Profit and Loss Statement
Your profit and loss statement (P&L) summarizes revenue, expenses, and net income. Reviewing it monthly helps you track whether your business is profitable and where that profit (or loss) is coming from.
To get the most from your P&L, look beyond the bottom line and dig into:
- Which revenue streams are performing best
- Whether operating expenses are creeping up
- Any one-time or unusual transactions that might distort your view
Use these insights to guide decisions around pricing, cost control, and where to focus your efforts for growth.
7. Monitor Cost of Goods Sold (COGS)
If you sell physical products or have direct costs tied to service delivery, review your cost of goods sold each month. Rising COGS can quietly reduce your margins even if your sales are steady or growing.
Pay attention to:
- Increases in material, labor, or shipping costs
- Changes in vendor pricing or order minimums
- Inventory waste, spoilage, or theft
If margins are shrinking, look for ways to cut costs, raise prices, or renegotiate supplier agreements.
8. Check Payroll and Contractor Payments
Make sure all payroll and contractor payments have been issued correctly and are recorded properly. Each month, verify:
- Employee hours and wage calculations
- Contractor invoices and payment dates
- Payroll tax withholdings and filings
Payroll mistakes can lead to fines and damage employee trust. If you do your own payroll, a monthly review is your safety net before errors snowball.
9. Track Tax Liabilities
Taxes don’t wait for year-end. Most small businesses have ongoing tax obligations throughout the year, including:
- Quarterly estimated income tax payments
- Sales tax collection and remittance
- Payroll tax filings
Use your monthly review to double-check that you’re setting aside the correct amounts and hitting your due dates. Falling behind can lead to costly penalties or audits.
10. Scan for Subscriptions and Recurring Charges
Small charges add up until they’re eating a hole in your budget. Many businesses sign up for tools they stop using or forget to cancel trials. Reviewing these charges regularly can uncover savings and prevent waste. Every month, scan your expenses for:
- Subscriptions you no longer use
- Duplicate software tools or services
- Auto-renewing contracts you forgot about
If you’re unsure what’s worth keeping, take time to compare accounting software, CRMs, or other services you’re paying for. The right tool should add clear value and align with your current needs—not just your initial expectations.
Build Your Monthly Financial Routine
A few tips to make your monthly check-in consistent and efficient:
- Pick a day: Block time on your calendar each month, ideally right after the month ends.
- Use a checklist: Keep a simple list to follow the same process each time.
- Delegate when needed: Your bookkeeper or admin team can help pull reports or flag items for your review.
- Track changes: Keep a brief log of any specific things you notice each month. It’ll help you identify trends over time.
A monthly financial review won’t take the place of a full budget or annual tax prep, but it will keep you out of trouble and in control. By tracking the essentials, you’ll reduce surprises, spot problems early, and make better decisions month to month. Best of all, once this review becomes a habit, it’s a quick and efficient task that shouldn’t take more than a few hours a month—and it can save you far more than that in time, stress, and money.
