The 30-Minute Financial Checkup Every Organization Should Complete Each Month
If I gave you 30 minutes to determine whether your organization was financially healthy, would you know where to start?
Many nonprofit leaders and business owners receive financial reports every month. They may check the bank balance, see whether revenue increased, or look at whether the organization generated a profit or surplus.
Those numbers matter, but none of them tells the whole story by itself.
A business can report a profit and still run out of cash. A nonprofit can have money in the bank that cannot be used for general operations. Revenue can increase while profit margins shrink. Financial statements can even look reasonable while hiding errors, incomplete reconciliations, weak controls, or transactions that deserve a closer look.
That is why I recommend completing a short financial checkup every month.
You do not need an accounting degree to do this. You need the right reports, a few good questions, and a willingness to investigate anything that does not make sense.
What You Need
Before beginning, gather these four items:
Your balance sheet or statement of financial position
Your profit and loss statement or statement of activities
Your budget-to-actual report
Your most recent bank statement and bank reconciliation
If your organization prepares a cash-flow forecast or financial dashboard, have that available too.
Then set aside approximately 30 minutes and review the following five areas.
1. Determine How Much Cash Is Actually Available
Start with the cash balance shown on your balance sheet. Compare it with the balance on your bank statement and review the completed bank reconciliation.
The two balances may not match exactly. Outstanding checks and deposits in transit can create legitimate differences. However, those differences should be documented in the reconciliation.
If your accounting records show significantly more or less cash than the bank, stop and determine why.
Once you know the cash balance is accurate, ask three questions:
How much cash is actually available for operations?
How many months of normal expenses could that cash cover?
What significant cash needs are coming in the next 30 to 90 days?
For a nonprofit, this analysis must distinguish between cash available for general operations and cash subject to donor restrictions or other limitations. Having $200,000 in the bank does not necessarily provide six months of operating cash if most of that money must be used for a specific program.
To estimate your operating runway, calculate your average monthly expenses. Using the last three months can help smooth out an unusually high or low month. Divide your available operating cash by that average.
For example, if you have $100,000 available and spend approximately $10,000 per month, you have about ten months of operating cash—before considering unusually large upcoming expenses.
Look ahead for payroll, quarterly taxes, insurance renewals, major vendor payments, grant-related expenditures, and debt payments. A strong bank balance today does not guarantee that cash will be sufficient next month.
2. Understand What Changed in Revenue and Expenses
Next, review your profit and loss statement or statement of activities.
Begin with revenue. Compare the current month with:
The prior month
The same month last year
The approved budget
Do not stop at whether revenue increased or decreased. Ask why it changed.
Was the difference caused by normal timing? Did the business gain or lose a major customer? Did a grant begin or end? Was a contribution restricted to a particular purpose? Did prices change? Was revenue recorded in the appropriate period?
The reason matters because different causes require different responses.
A temporary timing difference may resolve itself. The loss of a major customer may require changes to the forecast and spending plan. A restricted contribution may increase reported revenue without increasing the amount available for ordinary operations.
Then review expenses. Identify the three largest categories and any accounts with significant changes.
A large variance does not automatically mean something is wrong. It means leadership should be able to explain it.
Professional fees may have increased because of an annual audit. Payroll may have increased because the organization hired an employee. Program expenses may have risen because a grant-funded initiative began.
Those may all be reasonable explanations. The important point is that the explanation should be known, supported, and incorporated into future decisions.
Business owners should also look at profit margins. More revenue does not necessarily mean a healthier business if expenses are growing even faster.
Nonprofit leaders should evaluate whether spending aligns with the approved budget, program plans, funding requirements, and the organization’s mission. A nonprofit does not measure success solely by generating a surplus, but it still needs sufficient revenue and reserves to remain sustainable.
At the end of this step, you should be able to answer:
What changed?
Why did it change?
Does the change require action?
3. Review the Health of the Balance Sheet
The balance sheet often receives less attention than the income statement, but it can reveal issues that monthly revenue and expense totals do not show.
Start with accounts receivable.
How much are customers, grantors, donors, or other parties expected to pay? How old are those balances? Are amounts outstanding for 60, 90, or 120 days still collectible?
Revenue recorded on paper does not help pay expenses if the cash never arrives.
Older receivables should be investigated, supported, and evaluated under the organization’s accounting policies. Do not automatically remove an old balance simply because it has been outstanding for a certain number of days. First determine what the balance represents, whether collection efforts are appropriate, and whether an allowance or write-off is supported.
Next, review liabilities.
Ask:
Are payroll tax balances current?
Are credit cards reconciled?
Are unpaid vendor bills accumulating?
Are loan balances accurate?
Does leadership understand deferred revenue or contract-liability balances?
Are sales-tax or other statutory liabilities being handled appropriately?
Are there amounts that may be due back to a funding source?
For nonprofits, also pay attention to grant receivables, donor restrictions, conditional awards, and obligations associated with restricted funding. Conditions and donor restrictions are different accounting concepts, so unusual grant balances may require review by someone familiar with nonprofit accounting.
Watch for negative asset or liability balances, old outstanding checks, accounts that never change, and amounts no one can explain.
You do not need to personally correct every accounting issue. You should, however, be able to ask what each significant balance represents and receive a clear, supported answer.
“That number has always been there” is not an explanation. It is a reason to investigate.
4. Look for Unusual Transactions and Control Weaknesses
The fourth step brings a forensic perspective to the review.
This does not mean assuming that someone is stealing. It means using professional skepticism—the willingness to verify information instead of accepting it automatically.
Scan transaction detail for items such as:
New or unfamiliar vendors
Duplicate payments
Round-dollar payments
Transactions repeatedly falling just below an approval threshold
Unusual refunds, credits, or voided transactions
Checks written to cash
Payments made at unusual times
Employees and vendors using the same address or banking information
Credit-card charges without receipts or a clear business purpose
Manual journal entries affecting cash, revenue, payroll, or accounts receivable
One unusual transaction does not prove fraud. It may be a legitimate transaction, an accounting error, a documentation problem, or a weak process.
The next step is verification, not accusation.
You should also examine access and approval responsibilities:
Who can create a new vendor?
Who approves bills?
Who releases payments?
Who reconciles the bank account?
Who reviews the reconciliation?
If one person can initiate, approve, complete, record, and conceal the same transaction, the organization has a segregation-of-duties problem.
This is a common challenge for small businesses and nonprofits, but the solution does not always require hiring another employee. An owner, board member, finance committee member, or outside accountant may be able to provide an independent review of bank statements, new vendors, payroll changes, or payments above a defined amount.
The objective is not to create unnecessary paperwork. It is to prevent one person from having unchecked control over an entire financial process.
Finally, ask one of the most useful forensic questions:
What does not make sense?
Perhaps revenue increased while cash decreased. Payroll remained unchanged even though staffing changed. Payments to a vendor increased without a new agreement. Transactions regularly fall just below an approval threshold. Reports are consistently late, or someone becomes defensive when asked for documentation.
Do not dismiss these inconsistencies. Write them down and follow up. Errors, financial mismanagement, control failures, and fraud often become visible through patterns—not one dramatic transaction.
5. Turn the Review Into Action
A financial review should end with action.
Identify no more than three follow-up items each month. You may find more than three issues during your first review, but trying to address everything at once can prevent meaningful progress.
For each priority, document:
What you noticed
What information is needed
Who is responsible for following up
When the issue should be resolved
For example:
Accounts receivable: Balances more than 90 days old increased by $15,000. The executive director will review the accounts and provide a collection plan by Friday.
Credit cards: Three transactions are missing receipts. The cardholders will submit documentation before the monthly financial reports are approved.
Cash flow: Available operating cash covers approximately six weeks of expenses. The owner will update the 13-week cash-flow forecast and reconsider nonessential purchases.
Reviewing reports without following up is simply an accounting exercise. The purpose of financial reporting is to help leaders make decisions.
Make the Checkup a Monthly Habit
Your monthly financial checkup should answer five questions:
How much cash is actually available?
What changed in financial performance, and why?
Which balance-sheet amounts are old, unusual, or unexplained?
Do any transactions or access arrangements require further review?
What actions need to be taken, by whom, and by when?
This review does not replace the work of your bookkeeper, accountant, CFO, finance committee, or auditor. It helps leadership understand the organization’s financial position and fulfill its oversight responsibilities.
Financial health should never rest entirely on one person’s shoulders. The business owner, nonprofit executive director, board, and accounting team all have a role.
Set aside 30 minutes each month. Do not wait until the end of the year, the auditor arrives, or cash becomes tight.
Small financial problems are usually easier—and less expensive—to correct when they are identified early.
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