Should I Do Bookkeeping Monthly or Quarterly?

Setting up a bookkeeping system that works for your business is critical for your long-term financial success.

Without regular, accurate bookkeeping, you may lack up-to-date information about your financial state. This can lead to serious cash flow issues, errors and even compliance risks.

But how often should you review your books? Let’s explore the benefits of monthly and quarterly bookkeeping to determine which frequency might work best for your business.

The Benefits of Monthly Bookkeeping

Monthly bookkeeping involves completing reconciliations, reviewing transactions and generating reports at the same time each month, generally at the very end or beginning of each month.

There are many benefits to completing your bookkeeping every month, including:

Access to Up-To-Date Financial Information

Whether you’re running a brand-new startup or you’ve been in operation for years, it’s never wise to fly blind, especially when the financial future of your company is at stake.

When you complete your bookkeeping on a monthly basis, you get an up-to-date picture of your company’s financial performance every 30 days. 

Regular updates allow you to identify financial trends faster—both good and bad. Spotting good opportunities or potential cash flow issues early can help you take action as soon as possible and keep your operations running smoothly.

Better Cash Flow Management

The success of every business depends on positive, well-managed cash flow. 

Reviewing your finances monthly allows you to effectively manage your incoming and outgoing cash, catching overdrafts, missed vendor payments, payroll issues and any other problems before they snowball into a costly mess.

Monthly bookkeeping also helps you plan for the months ahead. By looking at prior financial reports, you’ll be able to make course corrections, forecast the upcoming month’s sales and craft a more accurate budget.

Simpler Tax Preparation

Tax season is one of the most stressful financial times for many businesses, but it doesn’t have to be. Keeping your records clean and organized each month simplifies the tax filing process. 

Also, if the IRS follows up with any questions or corrections, it will be easy to find the right file and make the necessary changes. 

Catching Errors Faster

While much of the bookkeeping process can be automated with software such as QuickBooks, there’s always the potential for human error. Monthly reviews of your books help you catch small discrepancies before they become costly errors. 

Monthly bookkeeping can also help you spot signs of fraud and unauthorized transactions, which are unfortunately becoming more common.

Who Is Monthly Bookkeeping Right For?

Monthly bookkeeping makes sense for the majority of businesses, including:

• Businesses with multiple employees
• Operations with tight profit margins that require frequent fine-tuning
• Companies with multiple revenue streams or recurring revenue
• Businesses that are in the process of growing or scaling
• Companies that are seeking funding (or will be in the future) and require up-to-date financial reports to show to investors or lenders

The Benefits of Quarterly Bookkeeping

Quarterly bookkeeping involves generating financial reports every three months. Generally, quarterly reports are produced during typical calendar quarters: January through March, April through June, and so on.

Quarterly bookkeeping has several benefits, including:

Saving Time for Small-Scale Businesses

If you’re operating on a very small scale and have no plans to grow your business any time soon, it may be enough to do your bookkeeping on a quarterly basis. 

Also, if you’re a small business that only deals with a handful of transactions each month, quarterly bookkeeping could save you valuable time and energy.

Lower Costs

Hiring an in-house bookkeeper or outsourcing the work costs money. For companies operating on a very tight budget or with limited staffing resources, less frequent bookkeeping might seem like a smart way to cut costs. 

But be careful: saving a bit of money may not be worth it if you have to spend hours untangling your finances each quarter.

The Potential Downsides of Quarterly Bookkeeping

While quarterly bookkeeping may work for some businesses, it does come with several disadvantages worth considering:

Delayed Response Time to Problems

Problems like invoice errors, overdrawn accounts, or even fraud can surface at any time. With quarterly bookkeeping, these issues might go unnoticed for weeks—or months—making them harder (and costlier) to fix when you finally catch them.

Increased Workload Once per Quarter

Doing three months’ worth of work at once can be stressful and time-consuming. A backlog of data can end up leading to errors, especially if your finances aren’t well organized and you have to go searching for the right documents.

Limited Financial Data

Up-to-date financial data drives decision-making. It allows you to see your current revenue, cash flow, profit margins and more, enabling you to make informed decisions about the future of your operations.

But when your most recent financial statements are a few months old, it can be tough to make good, data-backed decisions for your company. And when you’re trying to scale, flying blind isn’t just inconvenient—it’s risky. 

Who Is Quarterly Bookkeeping Right For?

Even with its limitations, quarterly bookkeeping might be the right choice for some businesses, including:

• Freelancers or sole proprietors with no other employees
• Businesses with minimal, predictable expenses
• Businesses with low sales volume
• Highly seasonal businesses that lack sales and expenses for most of the year
• Brand-new businesses with a tight budget and simple income streams

Even in these cases, we highly recommend that you look over your expenses and cash flow each month just to make sure everything is in order and that there are no glaring errors.

Final Thoughts

While there’s no “one-size-fits-all” answer for everyone, for most businesses, we recommend doing bookkeeping monthly. Not only does this help you keep your finances in order, it also gives you the flexibility to pivot and make timely financial decisions.

However, depending on your business’s size, transaction complexity, number of employees and growth potential, completing your bookkeeping quarterly may work for you.

If you’re unsure which frequency is right for your company, or if you’re ready to outsource your bookkeeping tasks to the professionals, reach out to Finvisor today. Our bookkeeping and accounting services can help simplify your finances and give you the peace of mind that you deserve.