There are a number of financial reports that can give you information on your business’s past, current, and future financial state. 

In my opinion, the following reports should be reviewed regularly:  

Balance Sheet 

In accounting, a balance sheet summarizes a company’s assets, liabilities, and equity at a given point in time.

Why is it called a balance sheet? 

Well, think of it as an equation: Assets = Liabilities + Equity. 

At all times, each side of this equation must “balance.” 

Items that generally appear on all balance sheets include assets such as cash, accounts receivable, inventory, and fixed assets. 

In the liabilities section, you will find items like accounts payable, payroll taxes, and short or long-term loans. 

Lastly, additional paid-in capital and retained earnings are found in the Equity section.

Income Statement 

How profitable is your business? Is that a question you can answer? 

Well, the only real way to know is to review your Income Statement. 

An Income Statement, or Profit & Loss Statement, shows you how profitable you are over a given period of time. 

It shows your revenue, cost of goods sold, and expenses. 

You can calculate your gross profit by subtracting your cost of goods sold from your revenue. 

Gross profit shows your profit before taking overhead costs into account. So it’s a rough measure of how efficient your business is. 

Your overhead costs are shown with your general or operating expenses. Some examples are rent, marketing, and bank fees – anything necessary to keep your business going. 

Looking for your “bottom line”? 

That’s your net profit – the final profit after subtracting your direct costs and operating expenses from your revenue.

Cash Flow Statement

The Cash Flow Statement is presented in three sections: operating, financing, and investing activities, and it indicates which areas of the business are generating and using the most cash. 

Your cash flow shows how much money is moving in and out of your business – including money needed to pay for taxes and other liabilities or asset purchases, not just income and expenses.  

One of the best uses for the Cash Flow Statement is to estimate future cash flow, which will assist with budgeting and decision-making.

Accounts Receivable Aging Report 

This report categorizes outstanding accounts receivable into groups based on the invoice’s due date, typically current, as well as 1-30, 31-60, 61-90, and >90 days overdue.

Your aged receivables show how long it’s taking your customers to pay you.  

If customers are not paying you and this number continues to increase, that can quickly become a problem.

Budget vs. Actual 

Review this report helps identify areas that were over or under budget, indicating the ability to hire additional employees, make a big purchase, or highlight areas where you may need to cut back.

The Budget vs. Actual Report should be prepared every month and reviewed with the financial statements.

Together, these reports help you determine if any areas of the business are not meeting expectations and should be investigated further.

When you invest in our monthly bookkeeping services, we consistently provide timely and accurate monthly financials and reports (like the ones mentioned above).

We can also assist with the actionable financial analysis you need to effectively run your business, analyze operations, and guide business decisions. 

Have a great week,
Tracey

“Accounting is not just about numbers. It’s about interpreting those numbers and being able to tell a story about them.” – Rosalind Resnick