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Monthly Financial Review Checklist for CEOs

One of a CEO's most important tasks is staying on top of the company's numbers. This isn't just something for accountants. Financial statements give insight into the health of all areas of the company as well as how it's achieving its goals. Here's what you should be reviewing each month.

Strategy Objectives

The first step is tracking how the company is following its near and long-term strategy. Everything a company does should have a purpose, and data is meaningless if it doesn't fit into the story of how a company is meeting its goals.

These are the key strategy review points:

  • What is the company's long-term strategy? Have there been any changes, or are there potential changes under review?
  • Did the company meet or make progress toward each of its short-term goals in the previous month?
  • Is the progress on its short-term goals leading to progress on long-term goals?
  • Are resources being allocated efficiently? Is there enough investment in areas that will help achieve goals faster? Is there too much investment in areas that aren't helping to move the company forward or that have less impact than underfunded areas?

Income Statement

The goal of every company is to make a profit, so the bottom line of the income statement is one of its most important measures. Of course, taking on additional expenses now could potentially lead to greater profits in the future. You need to understand both your net profit and why it is what it is. Here are the questions to ask:

  • Is the company profitable for the month, quarter, and year?
  • Has the company kept to its budget? If not, why? Were these helpful changes or areas that need to be adjusted?
  • What steps can be taken to improve profitably? Would they eliminate waste, improve efficiency, or hinder potential growth?
  • What key metrics best identify how the company is meeting its short- and long-term goals? Examples include profit or revenue growth, percent of revenue or profit contributed by different business lines, gross margins, and expenses as a percent of revenue or profit.

Balance Sheet

The income statement reports results, but the balance sheet can be a better predictor of the future. A healthy balance sheet can give flexibility and open up opportunities for growth, while an unhealthy balance sheet may force the company to slow long-term growth to survive in the future. There are several areas to consider.

Accounts Receivable

  • Is the company collecting on all of its accounts? If not, what is the reason for the delinquencies?
  • Is it possible to shorten the amount of time it takes to collect on each account?
  • Has the company properly accounted for any bad debt write-offs from both an accounting standpoint and a cash flow standpoint?
  • Are all customers being properly billed for all potential revenue items?
  • Would a change in payment terms or credit requirements improve any of the above items without unreasonably restricting sales opportunities?

Accounts Payable

  • Is the company paying its bills on time?
  • Is the company taking advantage of any early payment discounts?
  • Can the company take advantage of extended payment deadlines to preserve cash?
  • Are vendors willing to offer more favorable terms by providing either early payment discounts or longer payment timelines?

Accrued Liabilities or Expenses

  • Has the company recorded all expenses it hasn't been billed for?
  • Are there any other potential liabilities that should be recorded on the balance sheet?

Working Capital

  • Does the company have sufficient cash to meet its needs?
  • Is working capital properly balanced to give the company enough liquidity while also taking advantage of investment and growth opportunities?

Statement of Cash Flows

Virtually every business needs cash to operate. If you're on track for millions of dollars in profit but can't pay your suppliers or make your rent, you could be out of business. Taking on debt isn't always an option, and balance sheet assets may not be convertible to cash in time.

Consider these areas:

  • Do you have enough cash to comfortably make all needed payments?
  • What is the reason for any cash shortfalls? For example, have customers been slow to pay or was there a period of low sales?
  • Can you take steps to improve cash flows such as improving accounts receivable or slowing accounts payable?
  • Has the company properly accounted for all fixed, variable, and non-operating cash needs?

Accounting Processes

The key to being able to answer these questions is having the information you need. Accounting isn't just something that you do at the end of the year to prepare your financial statements or tax return. It's an ongoing process that allows you to have information at your fingertips when you need it.

Your accounting processes should capture information as it happens. This means automating the recording of things like sales, receivables, payables, and inventory. It also means integrating your different data systems so that you can quickly pull all your information together rather than waiting for different departments to run separate reports.

AccountingDepartment.com provides a full range of outsourced bookkeeping and accounting services. We make sure you have the information you need when you need it. Contact us today to learn more about how we can help your business meet its goals.

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