What reports should I review each month with my accountant?

At Towerstone Accountants we provide specialist small business accountancy services for owners, directors, and growing businesses across the UK. We created this webpage for small business owners who want clear guidance on managing finances, meeting tax obligations, and making informed decisions without jargon. Our aim is to help you stay compliant, improve cash flow, and build a more resilient business.

One of the biggest shifts I see in business owners who move from feeling reactive to feeling genuinely in control is how they engage with their numbers on a monthly basis. Many people assume that accounts are something you look at once a year, usually when a tax return or set of accounts is due. By that point, everything has already happened. The numbers are historic, decisions have been made, and there is very little you can change.

When you review the right reports each month with your accountant, accounting stops being a compliance exercise and starts becoming a management tool. You move from guessing how the business is doing to knowing. You spot problems earlier, you make better decisions, and you remove a huge amount of unnecessary stress.

In this article I want to explain, in practical terms, which reports you should be reviewing each month with your accountant, what each report actually tells you, and why they matter. This is written from first hand experience of working with UK sole traders, limited company directors, and growing businesses who want clarity rather than complexity. You do not need dozens of reports, but you do need the right ones, reviewed properly and consistently.

Why Monthly Reporting Matters

Before diving into specific reports, it is worth understanding why monthly reviews are so valuable.

Most problems in a business do not appear overnight. Cash flow issues, falling margins, rising costs, or tax shocks usually build slowly. If you only look at your numbers once a year, you miss the chance to course correct.

Monthly reporting allows you to:

• Spot trends early rather than reacting late

• Separate cash movement from real performance

• Plan for tax rather than panic about it

• Make confident decisions based on facts

• Build a stronger relationship with your accountant

The aim is not to drown yourself in data. The aim is to look at a small number of meaningful reports regularly and understand what they are telling you.

The Profit and Loss Report

The profit and loss report, sometimes called the income statement, is the single most important report to review each month.

This report shows how the business has performed over a specific period, usually month to date and year to date. It tells you whether the business is actually making money from its activities.

A monthly profit and loss report typically includes:

• Total income for the period

• Cost of sales or direct costs

• Gross profit

• Overheads and operating expenses

• Net profit or loss

When reviewing this with your accountant, the focus should not just be on the final profit figure. The real value comes from understanding what is driving that number.

You should be asking questions such as whether income is growing or falling, whether costs are creeping up, and whether profit margins are changing over time.

I often see business owners glance at the bottom line and move on. That misses most of the insight. A good monthly review looks at movements, patterns, and anomalies rather than just totals.

Comparing Actual Results to Previous Months

One of the simplest but most powerful ways to use a profit and loss report is to compare it to previous months.

Your accountant can help you look at:

• How this month compares to last month

• How this month compares to the same month last year

• Whether trends are consistent or changing

This comparison helps remove emotion from decision making. A slow month feels less alarming if you can see it fits a seasonal pattern. A strong month feels less misleading if you can see it is an outlier.

Over time, these comparisons help you understand what normal actually looks like for your business.

The Balance Sheet and Why It Matters Monthly

The balance sheet is often misunderstood and ignored, yet it is one of the most important reports to review regularly.

While the profit and loss report shows performance over time, the balance sheet shows the financial position of the business at a specific point in time.

It includes:

• What the business owns, such as cash, debtors, stock, and assets

• What the business owes, such as loans, tax, and suppliers

• The resulting net position

Reviewing the balance sheet monthly helps ensure the numbers you rely on elsewhere are actually accurate.

For example, if debtors are rising month after month, it may indicate payment issues. If tax liabilities are building up, it shows future cash pressure. If cash balances look healthy, the balance sheet explains why.

Many issues only become visible when you look at the balance sheet alongside the profit and loss report.

Cash at Bank and Cash Flow Position

While profit tells you whether the business is working, cash tells you whether it can keep operating.

Each month, you should review your cash position with your accountant, not just as a number, but in context.

This includes:

• Current bank balances

• Expected cash in over the next month or two

• Known cash out commitments

• Any upcoming tax payments

This discussion often highlights mismatches between profit and cash, which is where many businesses get caught out.

A profitable business can still struggle if cash is tied up in unpaid invoices, stock, or upcoming tax bills. Reviewing this monthly helps prevent unpleasant surprises.

A Cash Flow Forecast

If you want to move from reacting to planning, a cash flow forecast is essential.

A cash flow forecast shows expected money coming in and going out over a future period, often three to twelve months. It is not about precision, it is about visibility.

Each month, you should review and update this forecast with your accountant to reflect what has actually happened and what is now expected.

Key areas covered in a cash flow forecast include:

• Expected customer payments

• Regular monthly expenses

• One off or irregular costs

• Loan repayments

• Tax liabilities

By reviewing this monthly, you can see pressure points in advance and make decisions earlier, such as delaying spend, chasing payments, or planning finance.

Debtors Report and Credit Control

If your business invoices customers, the debtors report is critical.

This report shows who owes you money, how much they owe, and how long it has been outstanding.

When reviewing this with your accountant, you should focus on patterns rather than individual frustrations.

Key questions include whether debtor days are increasing, whether certain customers consistently pay late, and whether credit terms need tightening.

Regular review of this report helps improve cash flow without increasing sales. It also prevents bad debts building up unnoticed.

Creditors Report and Upcoming Commitments

On the other side of the equation is the creditors report, which shows what the business owes to suppliers and when payments are due.

Reviewing this monthly helps you understand short term obligations and manage relationships with suppliers.

It also helps ensure you are not overstating cash availability by forgetting about upcoming payments.

This report is particularly important for businesses with tight margins or significant supplier costs.

VAT Reports and VAT Liability

For VAT registered businesses, VAT reports should be reviewed monthly, even if VAT returns are only submitted quarterly.

This helps avoid the common problem of spending VAT and then struggling to pay it later.

A monthly VAT review usually includes:

• VAT collected on sales

• VAT paid on purchases

• Net VAT position

• Estimated VAT due

By reviewing this regularly, VAT becomes a known future liability rather than an unpleasant surprise.

Payroll and Staffing Cost Reports

If you have employees, payroll costs are often one of the largest expenses in the business.

Monthly review of payroll reports helps ensure costs are under control and aligned with performance.

This might include:

• Total payroll cost including employers National Insurance

• Trends in overtime or additional hours

• Changes in headcount

• Impact of pay rises or bonuses

These reviews are not about micromanaging staff, but about understanding how staffing levels affect profitability and cash flow.

Expense Analysis and Cost Trends

Monthly expense analysis helps you spot creeping costs before they become a problem.

Rather than reviewing every line, the focus should be on categories and trends.

Your accountant can help you identify:

• Costs that are increasing faster than income

• Expenses that may no longer be necessary

• Areas where efficiency could be improved

Small monthly increases often go unnoticed but add up significantly over a year.

Management Accounts as a Combined View

Many accountants provide monthly management accounts, which combine several of the reports discussed into a single package.

These often include:

• Profit and loss report

• Balance sheet

• Cash flow summary

• Key ratios or metrics

Reviewing management accounts monthly provides a structured way to stay on top of the business without needing to jump between multiple reports.

Key Performance Indicators and Ratios

Depending on the business, there may be a small number of key performance indicators that are worth reviewing each month.

These might include:

• Gross profit margin

• Net profit margin

• Debtor days

• Cash runway

• Revenue per employee

You do not need dozens of metrics. A handful that genuinely reflect business health is usually enough.

Your accountant can help you choose the right ones and explain what good looks like for your business.

Tax Position and Forward Planning

Each month, it is useful to review your tax position at a high level.

This does not mean calculating exact tax bills every month, but it does mean understanding how current performance affects future tax.

This might include:

• Estimated corporation tax or income tax position

• Impact of profit changes on tax

• Whether additional planning is needed

This approach removes fear and replaces it with awareness.

What You Should Be Talking About, Not Just Looking At

Reports on their own are only half the story. The real value comes from the conversation around them.

Monthly reviews with your accountant should include discussion around:

• What has changed and why

• What looks good and should be protected

• What looks risky and needs attention

• Decisions you are considering

• How the numbers support or challenge those decisions

This turns reporting into decision support rather than paperwork.

Tailoring Reports to Your Business

Not every business needs every report every month.

A sole trader may focus heavily on profit, cash, and tax. A growing company may focus on cash flow, margins, and staffing. A VAT heavy business may prioritise VAT and debtors.

The key is tailoring reporting to what actually matters for your situation rather than using a generic checklist.

Your accountant should help you decide what is relevant and adjust as the business evolves.

Common Mistakes Business Owners Make With Monthly Reports

Some common issues come up repeatedly.

These include reviewing reports too late, focusing only on the bank balance, ignoring the balance sheet, or looking at numbers without context.

Another common mistake is feeling overwhelmed and disengaging altogether.

Good reporting should create clarity, not confusion. If it feels overwhelming, the reports may not be set up correctly or explained well enough.

Final Thoughts

The reports you review each month with your accountant shape how you run your business.

You do not need endless spreadsheets or complex analysis. You need a small number of clear, accurate reports reviewed consistently and discussed properly.

When this happens, you move from reacting to problems to anticipating them. Decisions become calmer, more confident, and better informed.

Monthly reporting is not about control for its own sake. It is about understanding your business well enough to guide it in the direction you want it to go.

When you and your accountant are looking at the same numbers regularly, the relationship shifts from compliance to partnership, and that is where the real value lies.

You may also find our guidance on How often should I meet my accountant and What is a business cash flow forecast useful when exploring related small business questions. For a broader range of practical advice, you can visit our small business guidance hub.