Monthly accounting should be more than recording transactions and preparing accounts. Used properly, your monthly financials can tell you where the business is performing well, where cash is getting tied up, and where management may need to take action.
Here are seven areas worth reviewing every month.
1. Revenue – Is the business actually growing?
Don’t look at revenue in isolation. Compare the current month with previous months, the same period last year, and your expectations or budget.
More importantly, understand what is driving the change. An increase in sales is positive, but not if it comes with falling margins or significantly longer customer payment periods.
2. Gross Margin – Are sales translating into profit?
Revenue can increase while profitability falls.
Changes in supplier costs, project costs, labour or selling prices can gradually reduce margins. Reviewing gross profit and gross margin each month helps identify these changes early.
If margins are declining, management can investigate the reason before the impact becomes significant.
3. Receivables – How much money is still with your customers?
A business can report strong sales and still face cash-flow pressure if customers are slow to pay.
A monthly receivables ageing report should show:
- Total outstanding customer balances
- Amounts overdue
- Balances outstanding for 30, 60 or 90+ days
- Customers with significant overdue amounts
Growing receivables deserve attention, particularly when they are increasing faster than revenue.
4. Cash Flow – Where is the money going?
Profit and cash are not the same thing.
Cash may be tied up in receivables, inventory or other commitments even when the business is profitable.
Reviewing customer collections, supplier payments, payroll, operating expenses, loan repayments and other significant cash movements can give management a clearer picture of the company’s actual cash position.
5. Payables – What payments are coming up?
Knowing what the business owes is just as important as knowing what customers owe you.
Review outstanding supplier balances and upcoming commitments so that significant payments do not come as a surprise.
A business with good visibility over its payables can plan its cash more effectively.
6. Expenses – What’s changed?
The question isn’t simply whether expenses have increased.
It’s why they have increased.
Comparing monthly expenses with previous periods or the budget can highlight unusual movements in areas such as salaries, rent, professional fees, software, marketing and other operating costs.
Some increases will be expected as the business grows. Others may require investigation.
7. Tax & Compliance – Are the books keeping pace?
Accounting and tax compliance should not be treated as separate processes.
For UAE businesses, keeping accounting records current supports VAT and Corporate Tax compliance and makes it easier to identify outstanding obligations and maintain the necessary supporting records.
Regular reviews should include tax liabilities, filing status, payments and the completeness of the underlying accounting records.
The Point of Monthly Financial Reporting
The purpose of monthly accounts isn’t simply to confirm that the books are done.
It is to help management answer questions such as:
Are margins falling? Are customers paying on time? Where is cash being tied up? Are expenses increasing faster than revenue? What payments are coming up?
The earlier these issues are identified, the easier they are to address.
Good monthly financial reporting gives management a clearer picture of what is happening in the business — not just what happened at the end of the financial year.
How E Craft Global Can Help
E Craft Global provides accounting, bookkeeping and financial reporting support for businesses in the UAE, alongside VAT and Corporate Tax compliance.
We help businesses keep their financial records up to date and provide timely reporting that management can use to monitor performance and make informed decisions.
Need better visibility over your monthly financials? Get in touch with E Craft Global to discuss your accounting and reporting requirements.