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How to use your monthly financial reports to reach 2023 goals

January 26, 2023

Are Your Monthly Financial Reports Guiding Toward Your Goals?

As we enter 2023, you have most likely defined financial goals for your business to achieve in the new year. It may be a revenue target, or employee headcount, or even a cashflow target from profitability.

Regardless of what the goal is, the difference between success and failure is found in your numbers. Specifically, in this article, we’ll walk through how your monthly financial reports will be a compass to ensure you’re tracking toward your goals.

To maximize the chances of these goals becoming reality, it is crucial to use data to monitor your progress. Let’s dig in. 

Three Monthly Financial Reports You Need to Review

To start, we’ll take a broad view at the three most well-known financial reports.

  • Balance sheet: Assets and liabilities
  • Income (profit and loss) statement: Revenues and expenses
  • Statement of cash flows: Cash flows from operating, investing, and financing activities

Let’s break down how each of these three statements can help you meet your 2023 goals. 

Balance sheet

Since the balance sheet is a snapshot of your business’ performance at a specific point in time, you can easily evaluate areas including risk and cash on hand and get a high-level overview of whether the company is succeeding or failing. 

Each month, the takeaways from your balance sheet can help you know where to adjust your strategies and where to double-down. 

Income (profit and loss) statement

Since the income statement covers a period of time, it can help you determine the long-term profitability of your business. When you look at the income statement on a monthly basis, you can catch issues in time to make changes and ultimately meet your goals for 2023. 

If you’ve created a budget for the year, your income statement is where you can compare and contrast if your revenue or expenses met the target each month.

Statement of cash flows

The cash flows statement breaks down cash inflows and outflows that occur over the regular course of your company’s business (operating activities), the purchase and sale of assets (investing activities), and debt and equity changes (financing activities). This statement clearly illustrates which areas are generating the most and least cash, and you can make adjustments to your business activities based on this information. 

Overall, your monthly financial reports should function together as a scorecard for your business goals. Comparing the actual numbers from your reports to your goals is called variance analysis. When you make business decisions by using the financial statements to look at these variances, you can increase the likelihood of meeting your goals for the year. 

KPIs and goal-setting 

Key performance indicators (KPIs) are numerical measurements you can use to determine what progress your business is making in meeting its goals. When looking at your goals for 2023, you should ideally break them down into 3 to 5 KPIs. 

When you track them regularly, you can make timely corrections to stay on the desired path of success. The data you measure through using KPIs is a crucial component to meeting your objectives. Which KPIs you use depends on your industry and the goals you have in mind. However, some common examples are indicated below:

  • Customer Acquisition Cost
  • Net profit margin
  • Sales appointments booked
  • Churn Rate

The goal of KPIs is to simplify your reporting. Your income statement has a lot of numbers in it, but there are a few numbers that are the most important drivers. These numbers are predictors of success or failure. 

By using and tracking KPIs regularly, you’ll be able to make quick adjustments if things are off track. 

Accurate and timely financial reporting

By now, you know that financial reports can be a meaningful tool to measure progress toward business goals. However, if the statements are of poor quality and are untimely, there may not be time to make corrections! In preparing your monthly statements, you must ensure that your financial data and systems are accurate. The technology you use should provide quick reconciliations that enable accurate reports to be generated immediately.

Below are some reasons why timeliness is critical to financial reporting.

Making corrections

If your reports are made slowly, you may not have time to use them in making the necessary adjustments to reach your goals. You may not even realize that there is an issue until you see the financial statements, so it is important to have them as soon as possible to become aware of the problem.

Changes in market conditions and business financials

The conditions of the external market, as well as of your own business’ financial well-being, are constantly changing. In fact, they are changing everyday, so your monthly financial statements being completed even a few days sooner can make a huge difference!

Working with a partner

You may be thinking that numbers are all you need to make progress toward your financial goals, but people are also an important piece of the puzzle! Whether the financial statements are prepared internally or by outsourced accountants, the partner(s) you work with should provide meaningful contributions to the reporting process. You should ensure that all month-end close deadlines and plans are clearly communicated, which ties back to the importance of timely reports. Everyone needs to be on the same page to make quick and accurate reports a reality. 

Meeting your goals in the new year is entirely possible, but it will not happen unless you use your monthly financial reports to measure them along the way! Fortunately, Momentum can help you in this process.

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