5 Gaps that Can Distort Your Monthly Financial Visibility

Nick Roell

May 02, 2024

Financial bar chart

Monthly financial statements are the cornerstone of a thriving business. Yet, relying solely on cash basis accounting practices – such as entering deposits and bills into QuickBooks – may leave significant gaps in your financial visibility. These gaps can distort your understanding of what’s truly driving your business performance.

Maintaining your accounting records on an accrual basis is key. This method allows you to track your revenue and expenses as they occur, providing you a more accurate and reliable snapshot of your financial health.

Bookkeeping Issues

Many small and midsize business owners fail to properly allocate the revenue and costs across their monthly financials to ensure accurate real-time accounting.

For example, a pre-payment can create what looks like a revenue windfall one month and a deficit the next. An overdue client collection can push revenues into the wrong reporting period. These common scenarios, when accounted for on a cash basis, will make it difficult to distinguish good months from bad and profitable sectors from those lagging behind.

Below are five examples where revenue and expenses tracked using cash basis bookkeeping methods can create gaps that distort the true picture of your profitability and financial health:

1. Commercial and professional liability insurance expenses reported in one month rather than spread over time

2. Payroll misalignment between days worked and number of payroll periods in a month

3. Deposits on a job recorded into revenue in a single month for work to be done over time

4. Worked being performed for a customer over a period of time when invoicing isn’t done until the work is completely finished

5. Inventory is only reconciled on an annual basis

Better Business Guide
Learn more about the balance sheet, revenue, & profitability traps that can stand between you and your growth goals in our guide: Build a Better Business by the Numbers

Get Accurate, Real-Time Reporting

Don’t let monthly accounting gaps leave you with an unreliable view of the financial condition of your business. Strategic business growth can’t happen with financial metrics that capture where you were a month ago. You need to know where you are now and where you’re going. Growth plans and solid monthly financials are a tremendous source of insight you can use to drive strategic and profitable growth.

The right accounting partner can ensure that your monthly financials provide a window into accurate, real-time reporting you can use to make better decisions and seize opportunities with confidence.

The Kirsch CPA Group has deep experience helping growth-minded entrepreneurs reach their financial goals, with holistic accounting services that provide reliable, transparent, and real-time financial metrics that empower strategic decision making. Contact a member of our team today to learn more about how holistic accounting services and strategic business advisory services can move you closer to your goals.

Learn more about reliable monthly financials

© Copyright 2024. All rights reserved.


About The Author

Nick is passionate about making an impact on small and medium-sized businesses. Focusing on increasing the performance of…

Read More

Sign Up for Email Updates

Accounting & Financial News

What’s the Difference Between a Calculation of Value and a Conclusion of Value?

Most business valuation assignments call for a conclusion of value. However, there may be times when a…

Construction Business Owners: Avoid These Two Common Accounting Problems

For construction companies, accounting isn't as simple as just balancing the books every month. Contractors tend to…

IRS Issues Final Regulations Regarding the Advanced Manufacturing Investment Credit

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act — signed into law in 2022…