Of all of the six Business scoreboards, this is usually the one that I start within a company. The reason is simple; from it stems most of what you need to accomplish the other five, if you are doing the other five correctly. There are three steps in this process: close the month, prepare and analyze the reporting package, then meet to discuss the results, findings, observations, and recommendations.

First, you need to close your books after each month is completed and reconciled. This includes a comprehensive reconciliation of each balance sheet account, including things like inventory, cash, payroll liabilities, loan balances, and more. Most companies are not doing this, so here is some more detail on how to go about it.

Create a procedure for reconciling each balance sheet account. Reconciling means to validate the balance you have in your accounting software with some other independent source. For example, reconciling your bank account refers to ensuring the balance you show in your books matches the balance on the statement you receive from the bank, transaction-by-transaction. A similar procedure needs to exist for each account, and the backup detail of each reconciliation process should be saved or stored in a safe place each month.

After you reconcile all of the balance sheet accounts, you need to review all of the transactions on the profit and loss statements. The best way to do this is to run a report that allows you to look at the activity in each account for at least the last six months. Make sure rent is not doubled up in any months, and determine the root causes for any other anomalies or trends that seem out of line with the normal operations of the business.

You should finish the balance sheet and profit and loss statement reconciliations by the 10^th, or maybe the 12^th of the next month. Once you are sure everything is entered into your accounting system, it’s accurate, and it’s reconciled, you need to close your books. This means you lock up that month and all prior months so that no information or data may be altered in any way. Almost every accounting system has the ability to do this. If you’re not currently using this function, then begin using it immediately.

Now that everything is accurate and locked, it’s time to create the reports that should be in the Monthly IMPACT Indicators™ package. While every business’ needs will be a little different, here are some of the reports that every package should include each month:

• Comparative balance sheet
• Balance sheet ratio analysis and charting, including liquidity, Days Sales Outstanding (DSO), and more.
• Profit and Loss statement (P&L) for the current month and YTD with percentages of sales
• Comparative P&L with prior months, prior years, and industry
• Charts and graphs to show trends in relevant areas of the P&L
• Managerial reporting on profit drivers in the business
• Budget vs. Actual variance analysis, sometimes for up to three different budget scenarios
• Statement of cash flow
• Charts and Graphs to show trends in relevant areas of cash flow

Now that the reports are created and put into a package, you need analysis done from the perspective of a financial executive who knows your business. This analysis is often communicated in several ways, including a cover sheet as well as comments, notes, arrows, and highlights throughout the package.

With the reports and analysis in all of the key players’ hands, you need to have a meeting to discuss the month. When the reporting package meets the IMPACT criteria, I have yet to see where this meeting does not foster a strategic discussion that ends up benefiting the firm in some way. There are lots of business experts who tell you to have fewer meetings. Do not cut this one out. It should be the most beneficial meeting you have all month.