How frequently should you review your business financials?

How often do you think about your business numbers?

Many small and micro businesses that aren’t VAT-registered only look at their finances annually, often several months after the end of the tax year. As sole traders, we can file our taxes any time between 6 April and 31 January. If you are filing in January, you’re looking at your figures for 9-21 months ago: it’s ancient history, and generally not terribly useful. (Especially when those are pre-Covid numbers.)

My passion for helping creative small businesses to get away from this means that I want to show you that by looking at your numbers much more frequently and closer to now, you can make better decisions going forward.

Also, I want to help prepare those who will be affected by the coming Making Tax Digital (MTD) regulations. Starting in April 2027, any individuals who file Self Assessment Tax Returns, who have an income over £30,000 per year, will need to be using MTD software and send reports to HMRC every quarter. For those with an income over £50,000 per year, you’ll need to start in April 2026. At present, you’ll still pay your income tax annually, though HMRC is considering more frequent payments – their consultation on timely payments has just closed.

What is Making Tax Digital?

If you’ve never heard of Making Tax Digital, it’s the push by HMRC (Her Majesty’s Revenue and Customs) to get data digitally, and with more granularity, mostly in an effort to reduce tax fraud.

MTD has already been in place since April 2019 for VAT reporting, for businesses over the £85,000 threshold.

There are definitely some benefits of MTD, and also some challenges.

At the same time, HMRC is also working to harmonise their systems, so that we can tell them any given piece of information once. Currently, and/or in the past, they had separate systems that didn’t talk to each other, so you end(ed) up telling them the same numbers repeatedly. In general, in handling data, the more times you have to enter it, the higher your chances of making an error are; for example, transposing digits, misunderstanding what they’re asking for, etc. This is a good thing, and I’m happy to see HMRC taking this step.

If you are keen to start with Making Tax Digital for Income Tax for Self-Assessment before you’re required to in April 2026 or 2027, you can voluntarily sign up here.

To read more about Making Tax Digital, check out this blog post.

MTD-compatible software

The easiest way to comply with these regulations will be to use MTD-compatible accountancy software. There is a list here.

You can use Excel, but only with bridging software. Ultimately, the more complex your business becomes, the less easy Excel will be to use for your own reporting and planning needs, so I’d recommend that you start on accountancy software as soon as possible (for example, Xero, Sage, Quickbooks, etc).

I’ll cover some accountancy software in detail later on, but the biggest thing to do is to try them out first. Different software works better in different people’s heads; the key is to find one that is intuitive for you to use.

How frequently to review your business financials?

So, in a few years, you’ll need to pull together your business figures at least quarterly. As I mentioned previously, I find quarterly a good period for goal setting, so would always recommend reviewing your finances quarterly at a minimum, and doing it very soon after the end of the quarter, not 9 months later when the information is quite useless.

However, if you review your figures at least monthly, then as the quarter goes along, you can course correct as needed to keep yourself on track to meet those quarterly goals.

Remember, reviewing is separate from bookkeeping. Keeping your accounts up to date, at a minimum weekly, means that you can keep on top of your cash flow. It will also enable you to handle unexpected expenses much better than you will if you’re solely relying on the balance in your current account to tell you if you can afford a purchase.

Whether you should thoroughly review your figures more frequently than monthly depends on your business. A thorough review of your profitability, reviewing whether your expenditure meets your current needs and priorities, etc, could take you a couple of hours, and may not be fruitful for you to do every single week; it really just depends on your business.