A useful habit before relying on financial reports:

Don’t start with the income statement.

Start with the balance sheet.

A profit and loss report can look reasonable even when the underlying accounts need attention. The balance sheet usually tells you whether the system is being maintained well.

A simple monthly review:

  1. Bank and credit card accounts: Are they reconciled through the most recent statement?
  2. Accounts receivable: Are old balances still collectible, or are they just sitting there?
  3. Accounts payable: Are open bills current, duplicated, or already paid?
  4. Payroll liabilities: Do the balances match what has actually been filed or paid?
  5. Sales tax payable: Does the balance agree to recent filings?
  6. Loan balances: Do they match current lender statements?
  7. Uncategorized or suspense accounts: Are they being cleared, or becoming a parking lot?

None of this needs to be complicated.

But if these areas are reviewed consistently, financial reports become much easier to trust.

Good reporting usually starts with boring monthly discipline.