I never wait until December or a company’s fiscal year-end to review its annual results. Instead, I do it monthly. Year-end financial reporting should be a regular occurrence, and I’ll show you how; it’s easy.

The Primary Reason I Review Year-End Reporting Every Month

To alleviate confusion, my definition of reviewing year-end reporting each month is examining a company’s financial results over the past twelve months and comparing them to the previous four years. I do this to get a macro view of the company’s financial results.

Why wait until December or the end of the fiscal year when I can look at the numbers as though the year just ended?

Page One Financial Reporting

As a Board member or a financial executive, I don’t want to see year-to-date numbers on page one of the financial package. That’s page two.

Instead, I want to see the numbers as though the year just ended. Please show me the last twelve months compared to the previous four.

I follow this method when reporting financials to bankers. This is the first page they see when I design reports for CEOs. The year-to-date numbers are on the following page.

Is There Anything Wrong with YTD Reporting?

Probably 99% of U.S. businesses review a YTD P&L compared to last year or to budget every month of the year. There is nothing wrong with that. Many business owners think about the year at hand and try to beat a goal, target, or budgeted bottom line.

My point of view is inspired by the 1975 book The Mythical Man Month, which is geared toward IT professionals. The book has nothing to do with financial reporting, yet the title reminds me there is nothing special about a calendar year. I view every preceding twelve months as a year.

However, we live in a financial world where the calendar year is deeply ingrained in everyone. This practice is nearly impossible to forego, especially if bonuses tied to calendar profits are at stake.

I’m not asking you to agree with me but only to consider my perspective:

Monitor every 12-month period monthly.
Make sure your goal is to keep improving an issue that needs to be resolved based on priorities.
Accordingly, the goal is to improve, not to hit arbitrary targets, during the 12-month period following the calendar or fiscal year.

Instead of killing YTD reporting, follow the above suggestions along with my page one of reporting.

The Biggest Flaw of My 12-Month Approach

Common sense is usually our best guide to financial reporting practices. However, when I worked with a large vineyard and winery in Washington, I never applied this practice because our business model was tied to Mother Nature. Pruning, picking, and harvesting occurred at set times, not more than once during a fiscal year. Running P&Ls on any trailing twelve-month basis would be nonsensical.

The same principle applies to probably other industries. Accordingly, the year-end reporting approach I use each month will not always be applicable.

On the other hand, be careful with the following:

Month-over-month analysis
Year-to-date analysis during the first 5-6 months of the year

Let’s address each of these points.

Month-over-month reporting is helpful to an extent. The problem with comparing one month to another is that there is a 50 percent chance of either beating the other period or falling short. Also, a month-to-month comparison reveals no trends. Such reporting can trigger a signal where none exists.

Year-to-date analysis for the first few months can lead to the impression that there are signals in the variations when none exist. Similar to month-over-month analysis, trends are not presented in this analysis.