What Financial Measures Should Family Business Owners Review Each Month?
Short answer. Review the same monthly measures for cash, profitability, debt obligations, working capital, and performance against plan. Compare actual results with prior periods and the forecast, then explain material changes. Choose measures that fit the business, define them clearly, and ask your CPA to help resolve accounting questions.
Family business owners should review the same monthly financial pack to understand cash, operating performance, working capital, debt, and performance against plan. It should show what changed, what may need attention, and whether the company can meet its commitments. Stable definitions make monthly comparisons useful.
Start With Cash and Obligations
Review cash balances and a short-term cash forecast alongside receivables and payments due soon. Check payables and inventory separately, along with upcoming debt payments. Owners need to know whether cash will be available when obligations fall due, even when the income statement shows a profit. Ask management to explain delayed customer payments, overdue supplier balances, unusual inventory movements, or gaps between forecast and actual cash flow.
Consider working capital in light of the company's operating cycle. A growing business may need cash for inventory and customer credit before payment arrives. Track changes in those needs and check whether the forecast includes planned capital spending and other large commitments. If the business operates through multiple entities, ask for a clear view of cash by entity and any limits on moving it.
Track Operating Performance
Compare revenue, gross margin, operating costs, and operating cash flow with budget and forecast. The right measures depend on the business. Management should explain what each figure includes and why owners should watch it. Compare results with prior periods and investigate material changes. Sales can rise while margins fall or customer payment times stretch, so check those measures together.
Review debt balances, interest expense, repayment obligations, and compliance with lender terms. Check whether cash generation covers scheduled payments. If owners receive investment performance reports alongside company reporting, agree in advance on how performance is measured. As I wrote in my guide to operational processes, consistent records and clear access rules support sound oversight.
Make the Review Useful
Schedule a regular meeting for management to explain variances and risks, and identify decisions that need approval. The board or owners should ask what changed, what management expects next, and whether the forecast needs revision. Record decisions and assign follow-up responsibility. Keep definitions consistent from month to month so trends remain visible and results are comparable.
A clear internal reporting process helps owners spot developing issues while there is time to respond. Add measures tied to the company's particular risks, such as customer concentration or supplier dependence, when they affect cash or margins. Work with your CPA on questions about accounting treatment. A concise monthly review gives owners a shared picture of performance and focused questions to ask management.
Read next: What working capital buffer should a family business maintain?
It is important that the family and the board agree with the investment team on the various ways they measure performance
Sources: The Single Family Office. Informational only, not financial, legal or tax advice.