Monthly Financial Checkup

Have you ever worked somewhere that always seemed to be financially in trouble? Were they surprised at this? If they were surprised then one of the main reasons could be that they were not sufficiently monitoring financial activity, specifically by performing a monthly financial checkup.

What Is a Monthly Financial Checkup

Before answering that question, let me ask one. Do you have physicals done? If you are young you may not find a formal physical to be something you believe you need on a regular basis. On the other hand, an older person has been around long enough to realize that the things that can go wrong are numerous and sometimes a complete surprise. I suggest that you approach managing your business more like an older person might manage their health. Just as regular checkups are important from a physical standpoint, the financial health of your company requires regular checkups.

The monthly financial checkup is pretty much what it sounds like. Specifically, it is a time to review your results, identify problem areas or potential problem areas, and then take actions to remedy problems and prevent future problems.

I’ve mentioned these in various other articles, but this includes such things as:

  • Comparing current and prior year income statement results
  • Evaluating inventory levels to see if they are appropriate
  • Reviewing accounts receivable to identify past due customers
  • Analyzing cash flow to see if it is improving or deteriorating
  • Determining if the sales pipeline is adequate

Obviously these are just a sampling. Each company will have some unique things they to consider as well as some of the common items.

Don’t Wait

Although this article concerns a monthly financial checkup don’t get the idea that you have to wait until you have monthly financial statements. Many of these items can and should be monitored on a more frequent (perhaps daily) basis. For example, I believe you should always have a handle on what customers are paying slowly, your inventory levels, and your cash position.

If a company is willing to do the important day-to-day monitoring and make it a practice to incorporate a more formal process on a monthly basis, many common problems can be avoided.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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