Three Reports Your Bookkeeper Should Send You Every Month

What should land in your inbox after each month closes?

Three reports: a profit and loss, a balance sheet and a cash report. Each one answers a different question, and none of them can stand in for another. Together they tell you whether you made money, what you own and owe, and whether you can pay the bills coming up.

All three rest on one step that happens first. Reconciliation: matching each bank and card account in the books to its statement for the same date. The IRS tells small businesses to reconcile the checking account every month (Publication 583). If you're not sure it's happening, here's how to tell if your books are reconciled without asking anyone.

What does a profit and loss tell you?

It tells you whether the month made money. The profit and loss (also called an income statement) shows the income and expenses of the business for a given period of time, in the IRS's words. It ends with the difference between the two.

Review your P&L in 60 seconds:

1. Ask for it with last month and the same month last year in columns beside it.
2. Read the bottom line first: profit or loss for the month.
3. Scan each expense line for anything that doubled with no reason you can name.
4. Look for round numbers that look like estimates rather than real bills.
5. Find Uncategorized or Ask My Accountant: holding accounts for transactions nobody has sorted yet. Any balance there means the profit figure is a guess.
6. Write down one question for your bookkeeper, even if it's only to confirm the big line.

Local example: a shop on Greenville Boulevard that goes quiet when ECU students leave for the summer should read three months together, so one slow July doesn't look like a trend.

What does a balance sheet tell you?

It tells you what the business owns, what it owes and what's left for the owner on one date. The IRS describes it as showing the assets, liabilities and your equity in the business on a given date, so think of it as a snapshot on the last day of the month.

Review your balance sheet in 60 seconds:

1. Match the bank line to your bank statement for the same date.
2. Each loan balance should have dropped by roughly what you paid toward principal.
3. Compare credit card balances with the card statements.
4. Find sales tax payable: sales tax you've collected from customers that belongs to the state until you file.
5. Ask about any liability that keeps growing month after month.

Local example: the North Carolina Department of Revenue (NCDOR) is the state agency that collects sales tax. NCDOR says businesses it assigns a monthly filing frequency must file and pay by the 20th of each month for the month before. So for a retailer in Uptown Greenville on monthly filing, the sales tax payable line at month end should match the return due on the 20th.

What's the difference between profit and cash?

Profit is what the month earned on paper; cash is what's actually free to spend. The SEC puts it simply: an income statement tells you whether a company made a profit, and a cash flow statement tells you whether it generated cash. That's why the third report exists.

Two terms explain most of the gap. Accounts receivable (A/R): money customers owe you for work already counted as income. Accounts payable (A/P): bills you owe that haven't been paid yet. Loan principal, equipment and owner draws also take cash out without showing up as expenses on the profit and loss.

The cash report can be a formal statement of cash flows. For a small business, a one-page summary often does the job better: cash at the start of the month, money in, money out, cash at the end, plus who owes you and what you owe in the next few weeks. Ask for whichever format you'll actually read.

Review your cash report in 60 seconds:

1. Compare ending cash with last month's ending cash.
2. If profit was up but cash went down, find the reason: slow customers, a loan payment, equipment or owner draws.
3. Read the A/R list for anyone more than a month late.
4. Read the A/P list for anything due in the next few weeks.
5. Check taxes waiting to be paid: sales tax and payroll withholding.

Local example: NCDOR says employers who withhold at least $250 but less than $2,000 a month on average file and pay NC withholding monthly, by the 15th of the following month, except December, which is due by January 31. For a trade business across Pitt County heading into a slow January, that December payment belongs on the cash report before it's due, not after.

Which report should you read first?

Start with the report that matches the decision in front of you, then check one number on it.

• If you want to know whether the business is making money, then read the profit and loss for the last three months together, and check the net profit line month by month.
• Payroll or a large bill due soon? Read the cash report, and check ending cash minus everything due in the next few weeks.
• Meeting a lender or taking on debt? Read the balance sheet, and check loan and card balances against your statements.
• Keeping the books for a church or nonprofit? Read all three broken out by fund, and check that designated gifts sit apart from the general fund.
• When the reports never arrive, ask for them by name with last month's reconciliation report, and check whether the file needs a cleanup first.

For churches and nonprofits, money given for a building project or a mission trip has to be visible apart from the general fund, so the board can see that designated gifts were spent the way donors intended. That's the heart of church accounting, and it belongs in the monthly reports rather than a side spreadsheet one volunteer understands.

What if the reports never come, or they don't make sense?

Ask for them by name, and ask for last month's reconciliation report with them. If the answer is that the file needs work before reports can be produced, the job in front of you is a cleanup, and QuickBooks cleanup comes before any monthly rhythm can start.

If the reports arrive and you can't follow them, ask for a short note with each package that explains the two or three things that changed. You shouldn't need an accounting background to understand your own business.

Monthly reports for businesses around Greenville

For a business in Greenville, Winterville or Ayden, these three reports are what monthly bookkeeping should hand back to you. A retailer in Uptown Greenville needs sales tax owed to NCDOR visible every month. A trade business working across Pitt County needs to know where the cash sits before a slow January. A church treasurer needs fund balances ready for the board meeting.

If you can't name the reports you get today, start there. You're paying for the work, and the reports are how you check it.