Monthly Financial Review Process

Purpose

Define the monthly financial review process owners + managers should follow to stay ahead of cash + profitability. Most service-business owners check their bank balance + assume that's financial management. Real financial management is structured + predictable - the discipline of asking the same questions every month so problems don't sneak up.

Scope

Applies to:

• Sole-owner businesses
• Small businesses with bookkeeper but no CFO

Excludes large businesses with full accounting teams (different scope + workflow).

Responsibilities

• Owner / GM runs the review
• Bookkeeper prepares the data 24 hours ahead
• Tax professional / accountant reviews quarterly (separate cadence)

Procedure

Pre-meeting prep (bookkeeper, 1-2 hours):

1. Close the month's books by the 5th of the following month
2. Prepare P&L statement (last month + YTD + same month last year)
3. Prepare balance sheet (current vs end-of-last-month vs end-of-last-year)
4. Prepare cash flow statement (month + YTD)
5. Prepare A/R aging report (current, 30, 60, 90+ days)
6. Prepare A/P aging report (payables to vendors)
7. Compile KPI dashboard (see Financial KPIs reference)

Review meeting (owner + bookkeeper, 30-60 minutes):

Step 1: Revenue analysis (10 min)

• This month's revenue vs target?
• Same month last year?
• 3-month rolling trend
• Which service lines are growing? Declining?
• Any one-time events (storm work, single big install) skewing numbers?

Step 2: Cost analysis (10 min)

• Direct labor as % of revenue (target: 10-20% residential)
• Direct parts as % of revenue (target: 25-40%)
• Total direct cost = gross margin (target: 50-65%)
• Overhead as % of revenue (target: 20-30%)
• Net profit as % of revenue (target: 8-15%)

Any line item more than 20% off target? Investigate.

Step 3: Cash position (10 min)

• Cash on hand
• Days of operating expenses covered (target: 60+ days)
• A/R aging - any customers > 30 days late?
• Upcoming large bills?
• Forecast for next 30 days

Step 4: KPIs (10 min)

Pick 3-5 KPIs to focus on each month. Suggested rotation:

• Month 1: First-call resolution + callback rate
• Month 2: Average ticket + close rate
• Month 3: Customer acquisition cost + LTV
• Month 4: Tech revenue per hour
• Month 5: Customer retention rate
• Month 6: Marketing ROI by channel

Step 5: Actions (10 min)

Pick 1-3 actions for the next month. Examples:

• "If A/R aging > 30 days for [customer], call them this week"
• "If marketing is below target, increase [specific] spend"
• "If close rate dropped, review the last 5 lost quotes for pattern"
• "If labor cost is up, review tech utilization"

Document the actions; review them next month.

Acceptance Criteria

• Books closed within 5 business days of month-end
• P&L, balance sheet, cash flow generated
• KPIs calculated + tracked
• 1-3 specific actions identified for next month
• Previous month's actions reviewed (did they get done?)

Common pitfalls

• Skipping months: financial discipline lapses; problems compound
• Reviewing without taking action: data without decisions is just decoration
• Too many KPIs: 5-7 focused KPIs are better than 20 you can't act on
• Not benchmarking against industry: you can't tell if you're doing well without comparison
• Reviewing alone: a second perspective catches blind spots

What to do when numbers are bad

1. Don't panic. Most cash issues are recoverable with discipline.
2. Identify the root cause. Is it:

• Revenue problem (sales/marketing)?
• Cost problem (overhead/cost-of-sales)?
• Cash collection problem (A/R timing)?
• Combination?

1. Pick ONE high-leverage action for the month. Trying to fix everything at once usually fixes nothing.
2. Reassess next month. Did the action move the metric?
3. If you're in serious trouble, talk to your accountant + your bank early. They can help if engaged early; less if you wait until cash is gone.

References

• Service Roundtable financial benchmarking
• Manuall internal: Financial KPIs for a Service Business, Pricing Strategy Fundamentals