How to prepare monthly financial reports? | Free Guide with Samples 

Financial statements or financial reports are formal records of an entity’s financial activity. It is the main part of any business plan for attracting investors or loans. A bookkeeper usually creates monthly financial reports by setting financial strategies. 


What are Monthly Financial Reports? 

The most mandatory financial reports include 

  • A balance sheet that tracks the value of things owned & owed 
  • It tells whether the business gained/lost value and its current financial position 
  • Income statement that shows money earned & spent 
  •  It tells if the business had a profitable month or not 
  • Cash flow statement denoting the cash that a business earned 
  • It tells the spendable money a business has on credit 

These 3 will work together to determine and forecast the financial status of any organization.  


The monthly balance sheet, income & cash flow statement that has been covered within a specified month is called a monthly financial statement.  


Financial reporting helps an organization and its stakeholders, shareholders, potential investors & leading banks in predicting the current & future financial status of their business.  


Why Monthly Financial Statements are necessary? 

The findings from your monthly financial statement increase the internal business performance by updating them with changes or significant progress in the financial status and cash flow.  


A business’s monthly financial report determine 

  • If the business can efficiently generate cash flow& where the cash needs to be used 
  • Finding the potential issues that impact profitability 
  • Particular information about a business transaction 
  • Calculating whether the company can pay its debts 
  • Developing the financial ratio with a financial position 


How to prepare a monthly financial report sample? 

To create a monthly financial statement/report, you must have the following points in mind 

Step 1: Preparing a Balance Sheet 

balance sheet is a statement of financial position or snapshot of business for a specific month. The balance sheet will describe your business’s financial health. It is a 2-sided chart holding 3 components. On the one side – assets, and on the other side – liability and equity. If you want your balance sheet to be perfect, then it is important to balance both sides, i.e the sum of each side should be equal. 


List all assets, liability, and net worth/equity using the accounting equation which gives 


For partnerships and sole proprietors, the balance sheet is calculated as,

Assets = Liabilities + Owner’s Equity or Net Worth 


For corporations, the balnce sheet is taken as,

Assets = Liabilities + Shareholder’s Equity


Step 2: Preparing an Income Statement 

The income statement also known as P&L or Profit & Loss statement lists the income, expense, and net income/loss.  

Net Income or Loss = Income – Expenses 

Step 3: Preparing closing entries to go forward for the next monthly accounting report 

  • Close revenue accounts by preparing a journal entry to debit all revenue accounts 
  • Credit an account named income summary for total 
  • Close expense accounts by preparing a journal entry to credit all expense accounts  
  • Debit the already created income summary account for a total 
  • Transfer that income summary balance to the capital account by preparing a journal entry that clears the income summary account 
  • This will transfer the business’s net income/loss to the equity account of the owner 
  • Close drawing account  
  • In case, the business is either sole proprietorship or partnership, then close your drawing account by making a journal entry. It will credit the drawing account & debit the equity account of the owner  

After closing all entries, record the totals in your general ledger to begin the amount for your new monthly accounting report. All the revenue & expenses must have a zero balance. 


5 Financial Stats from Your Reports to Assist Businesses

When businesses look for financial reports for their company, there are so many things to consider, before making it and sometimes it may make you feel overwhelmed. Here we have listed some of the important financial stats from your reports to assist you in the right way to grow your business.

#1 Your Bottom Line – Profit

To prepare financial reports, the better place to begin is from the bottom line. To determine how your business is going, you need to validate your P&L statement on net income. It will let you know about your business profit, excluding the business expenses you paid. 


The next stage is to find trends. It means, you have to analyze, whether your numbers moved to the top or bottom or on the same stage. With this, you will get a clear idea to forecast your forthcoming profit.


To sustain your business, you must have the capability to pay yourself and satisfy your employee’s needs as per their post. The only way to achieve this is by focusing on the bottom line.

#2 Expense Trends

When you realize as your business is growing in the right way and if you are not taking the profit with you, then there is a problem. It clearly states that your expense is growing more, compared to your business revenue. If this is the statement, then you will not take money to your home. 


One of the best ways to prevent this situation is to keep track of your business expense trends. In your P&L statement, you can see the row called TOTAL EXPENSE. Analyze those total, and their trends for the latest 12 months. Now compare this to the total revenue trend.


Make the right business decision to have better income revenue with reduced expenses. Though you might find some points to increase your business revenue, the expense might look higher if you invest in the long-term such as – [urchasing new equipment or hiring staff to make your business grow.

#3 Accounts Receivable

Accounts Receivable is where your business revenue might be masked as it is the cash owed to your firm. It is the total that occurs in your balance sheet, with the sum of your outstanding invoices.


Enhance your business cash flow by following up with your clients to pay those respective invoices.

#4 Profit Per Customer

From the business perspective – you should consider the best client who generated more profit for your business. The individual who pays the highest fees might not be the one who generates the highest fee.


Probably, the expenses for your high-paying jobs too will incur more expenditures. If you can expect these expenses, you can raise your profit rate with your clients. It is considerably more significant to look at your business profit per customer / per project. 


Generally, these numbers aren’t incorporated in reports from your accounting software. Thus, it is significant to determine this at the project end. Next, divide those profits by the total no.of hours you performed on that project to receive the hourly rate.


 Using the above process, find which of your project made you earn more profit. Finally, you will get an idea to work with what types of projects and to avoid what types of projects. It helps you get more revenue in the right way for your business. 

#5 Number of Client Prospects

When it comes to a business, a boom and bust cycle can occur, when you are too attentive to the client’s work with less focus on attracting new businesses. You can prevent the challenges and problems of a bust by following the no.of future clients you have in your queue.


About how many customers are you speaking about your potential work? If the found the answer is small in number, then this is the time to improve or expand your marketing actions to attract more business.


Make sure to keep your list of prospects in the right way through you are busy with the client’s project. And concentrate on your marketing to make your business grow. 



What are the 5 types of financial statements?

Though there are several financial statement documents in a business, here are the five important financial statements.

  • Income statement
  • Balance sheet
  • Cash flow statement
  • Note to Financial Statements
  • Statement of change in equity

How do you write a monthly report?

  • Write “monthly report” and project name
  • Define the working hours for each of the project members
  • Set the spending hours
  • Outline all the relevant updates on the respective project
  • Discuss any of the business management issues and challenges
  • Overview of the project’s major events
  • Include the deadline of the project
  • Do this for each of your projects
  • Now examine and review the monthly report for any of the errors

What are the rules to prepare financial reports?

Financial statements want to reflect specific basic and essential features. Those features are – proper exposition, moving concern, accrual basis, applicability and aggregation, and finally, no offsetting. 


Financial statements must be created at least once a year. It should include comparative details from the earlier period and must be constant. But preparing the financial report on a monthly basis will help you check the trends and flops of your business expense and revenue.





myBooks logo

Free Accounting & Bookkeeping Software​

Organized Bookkeeping | Invoicing | Billing | Inventory Management | Expense Tracking & More

Related Articles