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How an Accountant Uses Monthly Financial Statements to Offer Advice

December 30th, 2022 | 8 min. read

By CSI Accounting Staff

You know the value of receiving monthly financial statements, and you're putting in the time and resources it takes. However, once they're in your hands, you're not sure what to do with them. How do you read financial statements? What are they saying?

If you have these questions, you should consider working with an expert to help you analyze them and get the best plan of action for your business.

At CSI Accounting & Payroll, we've been doing exactly that for more than 50 years. One of our main goals in our accounting department is to use the monthly financial statements we create to offer advice in a variety of areas. Have you ever wondered what kind of advice you could be receiving? Other small business owners in your position want to know:

  • Why should I meet with an accountant monthly instead of annually?
  • Which financial statements should I receive each month?
  • Which items on financial statements should I pay attention to? What will they tell me?

Financial Statements to Receive Every Month

At CSI Accounting & Payroll, we create monthly financial statements for you based on your books. Each month, you will receive the following statements:

Income Statements (P&L)

Also called Profit & Loss Statements, or P&L Statements for short, Income Statements show trends and blind spots when analyzed by someone who knows what each of the items mean. This financial statement is a business owner's favorite because it shows revenues and expenses on a monthly basis. However, revenue and profits alone don't necessarily dictate success. That's where a Balance Sheet steps in.

Balance Sheets

While small business owners tend to love Income Statements, accountants love Balance Sheets. When a professional looks at a Balance Sheet, they're able to see what the business is actually worth.

Why Meeting With an Accountant Monthly Matters

If you're like most small business owners, you only receive financial statements annually from a tax accountant. However, just like only speaking to an accountant once a year, only receiving statements once a year means you lose out on the opportunity to make informed and advised decisions year-round. That includes making moves that can minimize what you owe in taxes!

If you're like many other small business owners, you might use accounting software to automatically generate your financial statements on a more regular basis. However, there are downsides to this if there are any errors in your bookkeeping. If there are errors, you will either receive incorrect statements, or the statements will not generate until errors are resolved - it all depends on the software you use.

When you work with a monthly accounting firm, you receive the statements mentioned above every month so your business moves are timely and based on hard facts. Why should you meet with a monthly accountant? Because the financial statements start the story, and a conversation with you helps an accountant finish it. Each month, you know exactly where you stand.

Let's dive into some of the key items on your financial statements that a monthly accountant keeps an eye on - and what they can tell you.

5 Hot Button Financial Items to Keep an Eye On

1. Revenue Trends

Your financial statements - specifically your Income Statement - can show you where your business is going. There is no single line that will show you what's happening, but conversations with your monthly accountant can uncover the causes of specific successes and failures, as well as how you can prepare for trends instead of just barely rolling with the punches.

Ex. Your business is growing. Can we find out why it's growing? Should you hire more to accommodate your growth? What have you been doing that is working? How do you produce more? Will it be a short-term or long-term increase? All of the answers that you come up with together will help with tax planning.

2. Expenses and COGS

When you work with profit margins, that's just as important as your revenues themselves! High revenues are not indicative of a successful business if you have decreasing margins. Your financial statements can be used to show your margin on a product.

Ex. You sell a product. How do we make sure your margins stay up? Do you want to increase the price of your product or decrease your labor cost? Is your current cost of labor in line with other businesses in your industry? If you're not paying enough, is your turnover increasing? Are you considering the financial toll on your business that is associated with turnover?

3. Spending Areas

When you're watching your spending, you may think that you have a good grasp on all of your business expenses. However, some expenses creep up slowly and don't stay in line with the revenues they produce. Your financial statements show trends in different spending areas and highlight blind spots.

Ex. You started investing in marketing efforts. If you're seeing an increase in revenue associated with something like pay per click ads, for example, it can be easy to pay more and more. It can inflate drastically over time! Do you have any other blind spots? Are you spending too much on marketing to try to get sales? 

4. Investing in Your Business (Minimizing Taxes)

The Income Statement lists expenses related to taxes. That means when you invest in your own business, you're also often minimizing your tax liability. We may advise you to do things like:

  • Find things that are mutually beneficial to run through a business, such as a retirement account. You get some of this benefit back, and you also get a deduction.

  • Invest in equipment for your business. This is an upfront cost but will help you generate profits in the future.

  • Take advantage of tax strategies, such as getting the maximum benefit from pass-through entity (PTE) taxes. Your personal deductions may be limited, so pay taxes through the business if possible to get the full benefit.

5. Meeting Goals

If you don't have any business goals, you may need to reflect on your financial statements to find areas in which you can improve.

For business owners who do have goals, an accountant can give you the advice to get you there. They will help you determine long-term strategy and where you can reference your financial statements to track progress.

Ex. You want to sell your business in the near future. You need your best three years leading up to the sale because you need to provide a standard three to five years of records. They will point out areas on your financial statements to keep an eye on, such as trimming expenses and increasing revenue. You may even want to make large investments and track the returns - are sales and profit increasing because of them? If not, how do you pivot?


Get the Most Out of Your Financial Statements

Monthly accountants can offer different, more in-depth advice than annual accountants. Now that you know why you should meet more often, which financial statements you need monthly, and which items to pay attention to, you can start getting a better plan of action for your business.

We barely scratched the surface with advice topics - our employees in other areas can offer advice as well! Whether it be tips on how to save on payroll fees or tips on improving customer and employee satisfaction, we've done it all. Our most popular topics outside of financial statements are everything about tax planning, plus increasing profitability as a whole.

CSI Accounting & Payroll can guide your finances on a monthly basis through the use of your financial statements. This can help you with profitability, planning, goals, and more! Did we convince you yet? Click the button below for a free consultation to see if we're a good fit for each other.

Not ready to talk? That's okay! You should learn more about the price of monthly accounting first:

CSI Accounting Staff

This article was composed by a member of our staff who interviewed our experts to get the facts straight. Any uncited information found here came straight from a knowledgeable accountant or payroll specialist.