The Monthly Financial Review (MFR)

Ask 10 different finance pros what their monthly review process looks like and you'll likely get 9-10 different responses.

So what is it?

Monthly Financial Review (MFR) — Checklist of financial data and review procedures conducted every month (or 30 days) after your books are closed and financial statements prepared.

After the month ends and your financials are ready, what should you do with them? Answer that question and you have your own version of an MFR. This is your time to step back from the day-to-day, reflect on the financial trends, do some analysis, and course-correct your business.

Fortunately, part of my thesis in acquiring Profit Mastery was to share lessons and best practices from operating a group of businesses that I co-own.

Here's my monthly process:

1. Gather financials — Gather my financial statements (details on how I like them below)
2. Cash flow check in — Check on cash balances and cash flow using my 13-week cash forecast
3. Ratios and metrics — Calculate metrics and ratios that are key to my business (inventory is a big piece of my review process)
4. Visual aids — Using charts and graphs helps me spot trends, especially when comparing to a baseline like a monthly average
5. Growth trends — I want to know if my business trending up, down, or flat and whether those trends are accelerating or decelerating
6. Update forecast — New financial information = improved forecasting
7. Action plan — With this financial information, what needs to be done or investigated further (research is an action!)
8. Deliverables — Whether for clients or my own team, financial information and insights need to be shared with users of it

I could go deeper into every one of these (and Profit Mastery University touches on #1-3) but those are topics we'll cover in another post.

The key takeaway here — Do something with your financials. Consistency is something to strive for, but even if you're opening them up and glancing at them every few months, it's a good starting point. Build a process, or ask your accountant, bookkeeper (or us) to help you craft a process. Just get started.

If you want to geek out for a moment, here are the specific financial statements I like to review:

1. Financial statement overview — minimum 6-months of each statement displayed monthly (P&L, balance sheet, cash flow statement)
2. Last month compared to same month last year (include % / $ change)
3. Rolling P&L — both 12 month and 3 month
4. Last month budget vs. actual (mostly for forecasting improvement)

Homework

Write down your monthly review process. It's mid-month so you're likely going through this right now.

For most, the review process isn't well defined but something you've kept in your head. Write it down in bullet point format and compare to mine above. Fill in any gaps (or reply with things I'm missing!).

Implementation Services

Did you know we do this monthly review stuff for clients?

It's a straightforward process and inexpensive for the results ($2,500 initial assessment + monthly or quarterly rate):

1. Discovery call (book a time with me below)
2. Profitability assessment (one-time review)
3. Ongoing review (monthly or quarterly)

Book a Call