To help you run your business you need to look at financial reports. These can provide you with insights into your company’s performance in the past and present, as well as provide you with information to help you in the future markets.
The more information you have, the better the decisions you will make. You’ll be able to analyse operations, guide important business decisions and optimise operations to make your business run more smoothly.
There are numerous reports that you could utilise for your business. Here are our recommendations.
1. The Balance Sheet
This is the financial summary of your company’s total assets (current, non-current and intangible), its liability and the shareholder’s equity at any point in time. The balance sheet is usually created at the end of an accounting period.
Using the snapshot of the business’ financial position and its economic resources; you can discover trends and make better financial decisions. Also, if you are looking for credit, it will help lenders to determine your company’s creditworthiness.
2. Income Statement
Otherwise known as the Profit and Loss Statement, the income statement shows the total incomings and outgoings of the company, including the profitability over a specified period of time. For the business to be viable and valuable, the company’s revenues must exceed the expenses.
The income statement is used by various internal and external stakeholders to determine the business’ profitability. It can also be used by investors to assess the risk of investing more in a business or extending credit to the organisation.
3. Cash Flow Statement
This statement demonstrates what cash has come in and out of the business over a certain period. It only shows cash activity and ignores sales on credit and depreciation.
There are three sections to the cash flow statement: operating, financing and investing activities. The statement indicates what area of the business is generating the most cash for the business.
This can help your business to determine future cash flow and will help with budgeting and decision making. It can also be used in conjunction with the balance sheet and income statement to create the standard financial statement package. These three reports together should be prepared by your accounting team monthly and used to calculate KPIs and monitor their improvement (or decline) over a long time.
4. Accounts Receivable Ageing Report
The Accounts Receivable Ageing report details all the outstanding invoices. This can be reported based on the date of the invoice, typically separated into 1-30, 31-60, 61-90 and more than 90 overdue.
The most common problem for small and mid-sized businesses is poorly managed accounts receivable. Having this in a report allows you to see where money is owed and who you need to restrict services and credit to.
The report can be generated at any time and passed onto those responsible for debt collection. If there are still problems you can use this report to initiate collection procedures to improve business cash flow.
5. Budget vs Actual
This compares what you budgeted against what you actually spent. This will allow the financial and senior team to see if the projected budgets have been accurate. This will help with future decision making and resource allocation.
By helping your business to bring in line both the costs and the revenue, you can maximise the potential return and the profit margins of the business.
This report should be done on a monthly basis so your company can make changes on a regular basis and turn around poor performance before it becomes too much of a problem.
By running the top five accounting reports above, you can find out how well your business is performing, what actions are needed to improve results and how you can secure the future of your business.