As a small business owner, I know how tempting it is to put bookkeeping on the backburner. Sales, marketing, operations – those feel like more pressing priorities. But keeping timely books is critical for any business, no matter the size. I learned this lesson the hard way after waiting until tax time to update my records. What a nightmare that was! The hours sorting through piles of receipts and trying to recreate missing expenses was bad enough. But seeing how much money I lost by not catching issues sooner was even worse.

That’s when I made the switch to diligent monthly bookkeeping, and let me tell you – it made a huge difference. Now I want to convince every business owner of the major advantages monthly tracking provides over quarterly or annual bookkeeping. In this post, we’ll go deep on why consistent bookkeeping matters, how monthly tasks give you increased oversight, the easier workloads you’ll enjoy, and many other benefits. Whether you handle your books in-house or use an accountant or bookkeeper, you’ll see why monthly frequency is ideal for your bottom line. I’ll also share tips to make the transition from sporadic to monthly practices seamless. Get ready to gain more control and insight into your finances!

Why Regular Bookkeeping Matters

I won’t sugarcoat it – consistent bookkeeping is not the most glamorous business task. As entrepreneurs, we got into this to invent products, build brands, help customers – not sit behind a computer reconciling accounts! But as un-fun as it can feel, keeping your books updated is a non-negotiable ingredient for financial success. Think of bookkeeping as the vital signs check at your annual physical. Checking under-the-hood numbers like blood pressure, heart rate, and temperature isn’t exciting, but it tells your doctor a lot about your overall health.

Similarly, bookkeeping metrics such as income vs expenses, account balances, profit margins, cash flow, and balance sheets provide the pulse of your business. When I kept sloppy records, it was like wearing a blindfold – I was flying financially blind without key data guiding decisions. Once I got disciplined with monthly books, the complete vision of my company’s fiscal health became clear. The hours invested paid back tenfold in wisdom and control.

If terms like revenue, liabilities, reconciliation, and general ledger make you queasy, find an accountant or bookkeeper you click with. But don’t fully outsource the numbers – still make understanding your finances a priority. Think of bookkeeping like getting in shape – hiring a trainer provides guidance, but you have to put in the sweat and commitment. Let’s look now at the specific reasons monthly tracking is ideal.

Monthly Bookkeeping Allows You to Spot Issues Sooner

One of the biggest advantages of monthly bookkeeping over quarterly or annual bookkeeping is that it allows you to spot any issues much sooner. When bookkeeping falls to the wayside for months on end, you miss early warnings signs of money leaks, poor margins, high expenses, and other issues impacting profit and cash flow. By the time you update your books months later, small problems have compounded into major headaches.

With monthly bookkeeping, you quickly catch and correct any problems. For example, you may notice an unexpected jump in advertising costs that requires adjusting your marketing budget. Or you may see accounts receivable lagging, requiring you to follow up with overdue customers. Monthly reviews let you investigate discrepancies or concerns while they are still recent and address them before lasting damage is done.

In addition, monthly bookkeeping enables you to identify positive trends sooner as well. You may discover higher than expected sales that indicate an opportunity to ramp up inventory orders. Or strong margins may show excess profit to invest in growth initiatives like new hires or improved technology. Without monthly tracking, you miss out on capitalizing on these types of opportunities in a timely manner. But with your finger on the financial pulse of your business each month, you spot red flags and chances for growth early.

Monthly Bookkeeping Means Smaller Workloads  

Another big perk of monthly bookkeeping is that it breaks down the work into smaller, more manageable workloads. When bookkeeping is only done quarterly or annually, it turns into a huge, dreaded task. Plus, when there are months of accounting and reconciliations to do, the likelihood of errors and omissions increases.

By spreading bookkeeping duties over 12 months rather than 4 quarters or 1 year, each session is much less overwhelming. Monthly tasks involve pulling your most recent transactions, receipts, and documents and recording them accurately. Monthly bank and credit card reconciliations, profit and loss statements, and other reporting based on 30 days of activity is far less cumbersome than reviewing everything at one time.  

The work is also easier to remember and verify when it’s done monthly. Trying to recall details from 6 months ago or find missing documents from 8 months back is difficult. But working with expenses, income, and other financial data from the past 30 days keeps everything fresh and organized. Having smaller monthly workloads reduces procrastination, errors, and stress.

Monthly Bookkeeping Enables Better Financial Control

In addition to spotting issues and managing workloads, monthly bookkeeping also provides much better financial control. When you let bookkeeping slide for extended periods, you lose the ability to tightly manage your company’s finances. But closing the books each month gives you a current picture of where your business stands.

With monthly financial reviews, you can closely analyze which areas may be over or under budget. For example, you may find that utility or shipping costs have crept up higher than projected. Or payroll may be running under budget due to open staff positions. You’re able to adjust and re-forecast budgets with real figures each month rather than vague quarterly projections.

Monthly bookkeeping also gives you tighter control over cash flow needs and projections. By tracking all income and expenses and reconciling accounts monthly, you know exactly how much cash you have on hand. You can also better forecast upcoming cash requirements for the next month, quarter, or year when you have a regularly updated view of your financial position. Watching profit margins, the timing of tax and loan payments, and projected capital needs on a monthly basis keeps your finger on the pulse of cash flow.

In essence, monthly bookkeeping translates into better financial control. Rather than feeling like your business’s numbers control you, consistent monthly practices empower you to control your finances.

Monthly Bookkeeping Helps with Budgeting  

Building on the previous section, monthly bookkeeping enables superior budgeting compared to sporadic quarterly or annual bookkeeping. Creating budgets is a vital business practice we don’t recommend skipping. Budgets provide roadmaps for spending, help manage resources efficiently, and improve profitability when executed well. But without disciplined monthly bookkeeping, budgeting is difficult and inaccurate.

When you update your books monthly, you have precise information to develop detailed budgets. You can budget for sales and expenses line-by-line based on historical data and trends rather than guesses. Key line items like payroll, rent, supplies, utilities, and other regular expenses can be accurately budgeted using past monthly costs. Irregular expenses can also be reviewed and averaged for yearly budgets.  

In addition, monthly bookkeeping allows you to measure real figures against your budgets. This helps you analyze overages or shortfalls and determine where to adjust budgets. It’s impossible to have this type of precise budget tracking if bookkeeping is only done quarterly. But with monthly closed books, you have the figures to build budgets and compare your actual monthly numbers to those projections. Monthly bookkeeping gives power to the budgeting process.

Monthly Bookkeeping Supports Accurate Tax Filing

For business owners, tax time is no fun. But the process is exponentially more stressful when bookkeeping records are not consistently maintained. Monthly bookkeeping leads to accurate income, expense, deduction, and other data required for taxes. This ensures your tax liability is calculated correctly and avoids penalties from errors.

With diligent monthly bookkeeping, you have clean records to provide your accountant and clearly support the amounts on your tax return. When it comes time to file, you simply send your complete QuickBooks or Excel files or print out the monthly reports. An accountant can quickly review and incorporate your numbers rather than sorting through a year’s worth of messy receipts and transactions.

Conversely, when bookkeeping is not done monthly, many tax deductions may be missed. Expenses get lost or forgotten, incomes go unrecorded, and errors get introduced when trying to recreate activity. In addition, quarterly filings of payroll taxes are hard to complete accurately without monthly reconciliations. This leads to faulty tax returns that over or under-calculate what is owed. Skipping monthly bookkeeping can mean leaving money on the table or incurring IRS penalties.

By staying on top of your books monthly, everything adds up neatly at tax season. Your accountant has clean records that clearly justify your income, expenses, deductions, credits, profit and loss statements, and other tax components. Monthly diligence leads to timely and accurate tax filing.

Monthly Bookkeeping Facilitates Business Loans and Financing  

Raising capital is key for many businesses to launch, grow, or achieve financial goals. Whether applying for a small business loan, line of credit, equipment leasing, or other financing, lenders scrutinize your company’s finances. Complete, current books are critical for qualifying and getting approved at favorable terms. This is an important benefit of maintaining monthly bookkeeping over periodic practices.

When seeking business financing, most institutions require presentation of financial statements, tax returns, profit and loss statements, accounts receivable/payable, and other documentation. If you can only provide incomplete, outdated, or sloppy records, lenders see this as a red flag. But with orderly, monthly bookkeeping records, you convey responsibility, management, and fiscal control.

In addition to approving financing, monthly bookkeeping gives you a hand in negotiating the best rates and terms. When you have tight cash flow management, increasing sales trends, and strong profit margins validated through monthly books, you gain leverage with lenders. This allows you to potentially secure lower interest rates, longer repayment periods, lower collateral requirements, and better overall offers. Even if you don’t need funding immediately, proper monthly bookkeeping keeps your options open when financing needs arise.

Monthly Bookkeeping Costs Less Overall

At first glance, monthly bookkeeping may seem more costly than quarterly given the increased frequency. But in reality, staying on top of your books each month costs less overall. First off, monthly practices prevent expensive penalties down the road from inaccurate quarterly tax filings, unrecorded income that leads to audit fees, or higher scrutiny from lenders due to poor records. This penalty prevention alone makes monthly worthwhile.

Additionally, monthly bookkeeping means your accountant spends less time (and bills you less) to update and prepare your books at tax season. When records are complete and clean, your accountant simply reviews rather than fixes and reconstructs. This lightens your accounting bill each year.

The predictability of monthly costs also allows accurate budgeting and allocation of bookkeeping expenses. Rather than one massive quarterly or annual accounting bill, costs are spread evenly across months for smoother cash flow management. This consistent budgeting lowers the overall bookkeeping burden.

For DIY bookkeeping, monthly tasks take little time once set up properly. Many report running and reconciliation functions require just a few clicks if books are maintained diligently. And with affordable online bookkeeping software, there is little incremental cost to more frequent logging. The benefits of monthly tracking outweigh any minor additional time investment.

In total, diligent monthly bookkeeping reduces painful penalties, lowers accountant fees, allows better budgeting of costs, minimizes DIY time investment, and cuts potential borrowing costs. While seeming more intense than periodic practices, the overall cost savings from consistent monthly bookkeeping quickly add up.

How to Switch to Monthly Bookkeeping

Convinced of the advantages, you may be eager now to switch from quarterly to monthly bookkeeping. Here are some tips to effectively make the transition:

Partner with a Bookkeeper for Monthly Services

If you currently handle bookkeeping sporadically yourself or rely on a yearly accountant, consider partnering with a bookkeeper for monthly assistance. A bookkeeper can guide you through regular monthly tasks like transaction entry, categorization, account reconciliations, financial report generation, sales tax calculations, payroll processing, and other duties. This ensures consistency without becoming burdensome.

When selecting a qualified bookkeeper, look for someone proficient in your accounting software, responsive to requests, and able to explain reports and processes clearly. Maintaining open communication and providing needed documents and payment approvals each month is key. Monthly bookkeeping sessions may last 4-8 hours depending on complexity. Budget $50-$100 per hour.

Use Bookkeeping Software for Regular Tasks 

Leveraging user-friendly accounting software is key for do-it-yourself monthly bookkeeping. Software like QuickBooks Online or Xero allows you to connect bank/credit card accounts for automated transaction feeds, generate and email invoices, run reports, and perform reconciliations. Features like mobile apps make recording and categorizing expenses on-the-go easy.

Choose software that supports your monthly volume of transactions, integrates with other business programs, and fits your budget. Plan to spend 15-30 minutes daily or 1-2 hours weekly for data entry, categorization, and organization. Another 1-3 hours monthly will be needed for reconciliations and reporting. Efficiency improves over time.

Schedule a Monthly Close-Out  

Mark your calendar for a consistent monthly date like the last day of the month to “close out” each month. This close out day is when you’ll run final reports and financial statements and ensure transactions, accounts, and books are reconciled and completed. Use the data to analyze budgets, profitability, cash flow, and other metrics.  

Develop checklists for monthly tasks and reports to generate. Review the month’s high-level numbers as well as line-by-line details. Update budgets or projections based on the month’s performance. Address any discrepancies and recorded needed journal entries. Having a routine calendar date and consistent monthly close out process ensures diligence.

Create a Consistent Process

The key to successful monthly bookkeeping is consistency. Create set schedules for entering transactions, reconciling accounts, sending reports to stakeholders, reviewing cash flow, and all other monthly tasks. Document procedures for efficiency and accuracy. Follow checklists for monthly closes. 

Automate what you can through accounting software rules and reminders. Having an established process makes monthly bookkeeping manageable and sustainable rather than haphazard. Set goals like finishing books for the month within 5 business days of month end. Build the discipline to stick to regular procedures.

Conclusion

Moving your business’s bookkeeping from quarterly to monthly frequencies provides immense benefits. From spotting financial issues sooner to lightening tax time workloads, monthly tracking offers tighter control and management. While switching from quarterly to monthly practices involves some initial effort, the long-term dividends are plentiful.

Consistent monthly bookkeeping quickly gives you improved grasp of your business’s financial health. You’ll notice problems or opportunities faster, budget with greater accuracy, and have the records to qualify for funding. By closing your books each month, you gain insight, efficiency, and confidence. Implement the tips provided above to successfully make the shift. The time and focus required monthly pay off exponentially with less financial uncertainty, lowered risk, smarter planning, and greater oversight into the fiscal status of your growing business.