There’s no shortage of things to do while running a small business. And when you’re focused on the day-to-day, it can be too easy for your monthly accounting to slip through the cracks.
But accounting isn’t just necessary for compliance—it’s essential for your business’s success. Staying on top of your finances monthly helps avoid tax-time panic, supports better decision-making, and keeps cash flows on track.
This guide is specifically designed for small business owners who feel overwhelmed by the accounting side of things and want to take control of their finances.
We’ll break down all the key monthly accounting tasks you should be on top of, and provide tips for simplifying the process (including when to ask for help).
What exactly is monthly accounting?
Monthly accounting simply refers to reviewing, organizing, and updating your financial records each month. It means taking time to track what money is coming in, what’s going out, and where it’s going, so you always have a clear picture of your financial health and stay on top of your overall business finances.
Think of it as giving your business a regular financial checkup. It gives you a pulse on your finances, helping you make smart spending decisions, plan for growth, and spot financial issues early on.
Immediate and long-term benefits of monthly accounting
Taking a little bit of time each month to stay on top of your accounting can pay off quickly, both now and down the road. Even if you’re overwhelmed, monthly accounting offers quick wins leading to peace of mind and smarter financial planning.
Here’s what regular monthly accounting can do for your small business:
- Avoid tax-time panic: No more scrambling to find receipts or make sense of backlog transactions come tax season. With proper accounting, you can avoid costly tax mistakes (the IRS collects billions of dollars in employment tax penalties yearly) and stay ahead of your potential tax liability.
- Keep cash flow steady: Spot cash slowdown or gaps in income early, so you can adjust before a crisis hits and track cash flow trends over time to anticipate challenges.
- Make smarter decisions: Up-to-date financial information allows you to confidently plan spending, set prices, and make more informed future business decisions.
- Catch errors before they snowball: Fixing a small mistake from the previous month is much easier than finding it later.
- Build investor and lender confidence: Clean, consistent accounting makes applying for loans easier and appeases investors because investors and lenders rely on accurate financial statements.
Core tasks involved in monthly accounting
Not sure what monthly accounting should really look like for your business? Here are the main tasks.
Review financial transactions and reconcile accounts
One of the most important steps in monthly accounting is reviewing your financial activity in detail. This means going through transactions from your bank accounts, credit cards, and loan activity, and don’t forget to reconcile cash accounts for a complete picture.
You should categorize all income and expenses, adjust entries in your accounting, match transactions to receipts and invoices, including gathering and organizing all expense receipts, and reconcile accounts to bank/ credit card statements.
Reviewing transactions in this manner allows you to spot errors, catch potential fraud, understand the state of your finances, and maintain the integrity of your financial data.
Update and analyze financial statements
The next step is updating and analyzing your monthly financial statements and generating timely financial reports. Regular financial analysis of your statements helps you spot opportunities, reduce risks, and stay ahead of economic challenges.
These should include the following core reports:
- Profit and loss statement (P&L): This shows your income and expenses over a set period of time. It helps you answer the question: Are you making more than you spend?
- Balance sheet: The accounting balance sheet shows what your business owns (assets) versus what it owes (liabilities). Make sure to review your balance sheet accounts regularly to maintain accuracy.
- Cash flow statement: This tracks how cash moves into and out of your business. Can you cover upcoming expenses?
With these statements, go beyond numbers alone, and look for trends. Are expenses creeping up? Is income spiking during certain seasons? Which clients are slow to pay?
Preparing financial statements regularly keeps you compliant and gives you sharper insights into your performance, helping you confidently shape future business decisions.
Record and track receivables and payables
Managing the money coming in (accounts receivable) and going out (accounts payable) keeps your operation moving smoothly and avoids cash flow crunches. If you lose track of either, you might be unable to pay employees or invest in growth, even if you’re paying bills on time.
Responsibilities include following up on unpaid invoices, recording incoming payments promptly, and regularly review accounts receivable to ensure you’re not missing out on collections.
Pro tip: Set calendar reminders or use accounting software to automate certain tasks to stay organized and ahead.
Review payroll and employee-related costs
Whether you’re a solo business owner or you have a team, payroll plays a key role in compliance and financial stability.
Every month, you need to:
- Run payroll accurately and on time.
- Review payroll tax withholdings.
- Update any changes to benefits or contractor payments.
Review business budget vs. actuals
How much is your business spending, and is it within budget? That’s a question you need to answer every month.
By comparing the budget to actuals each month, you set the stage for more accurate cash flow projections and smarter long-term planning.
Plus, these monthly check-ins help you create more accurate, realistic financial forecasts over time.
Document notes or changes for your accountant
The more information your accountant has, the more you can save time and money and prevent confusion down the road.
Keeping a simple log of information can help with everything from tax prep to long-term planning, including more effective tax planning and minimizing your tax liability.
Here’s what to jot down each month:
- Major purchases or investments.
- Loans taken out or paid off.
- Any unusual income or expenses.
By consistently documenting these notes and changes, you make tax prep smoother and support accurate general ledger reconciliation, ensuring that all your accounts align properly.
This proactive habit strengthens the accuracy of your overall financial records and empowers your accountant to deliver even better insights and guidance for your business.
DIY vs. partnering with an accounting professional
Not sure if you should tackle your monthly accounting the DIY way or partner with an accounting professional? As it turns out, 70% of small businesses don’t have an accountant.
In some situations, it might be better to handle your accounting in-house—let’s say, if you’re a new business or your finances are simple.
However, as your business grows, so does the complexity of your accounting needs. Eventually, doing it all yourself can lead to missed opportunities, costly mistakes, and unnecessary stress.
So, how do you know when to bring in a professional? If you’re struggling to keep up with these tasks every month, second-guess your reporting, or find that accounting tasks are eating into time you should spend on your business, it’s time to call in support.
How Archer Lewis can lighten the load
If you’re looking for your next trusted accounting partner, Archer Lewis is here to help. We’re more than just another firm: we’re dedicated to your long-term growth, instead of just tax-season help.
Our bespoke accounting services are designed for businesses just like yours and include monthly bookkeeping, financial reporting, payroll processing, and strategic planning through fractional CFO support.
What makes Archer Lewis different? We use a people-first, relationship-driven approach combined with the capabilities of a national network to meet your needs. Our team is available and responsive, and we’re here to help you simplify your financial world.
Your monthly accounting doesn’t have to be a drag
Monthly accounting might not be your favorite activity, but it’s key to a stable, stress-free business prepared for whatever the future holds. If you feel like you’re in over your head or have fallen behind on your accounting, it’s not too late to get back on track, especially with some help.
That’s where Archer Lewis comes in.
Let’s connect and discuss how we can support your monthly accounting process, so you can focus on what you do best.
