6 periodic essential reports for the business owner
Balance Sheet:
The balance sheet is a snapshot of your company's financial position at a given point in time. It shows your assets, liabilities, and equity, which are the key components of your company's financial health. Your accountant should prepare this report for you on a monthly or quarterly basis, depending on the size of your business.
Example: Let's say you own a small retail store. Your balance sheet would show your inventory, cash on hand, accounts payable, and owner's equity. By analyzing this report, you can see if you have enough cash to cover your liabilities, whether your inventory is selling well, and whether your equity is growing or shrinking.
Income Statement:
The income statement, also known as the profit and loss statement, shows your company's revenues and expenses over a specific period. Your bookkeeper should prepare this report for you on a monthly basis.
Example: If you're a freelancer, your income statement would show your revenues from various clients, along with your expenses, such as rent, utilities, and office supplies. By analyzing this report, you can see how much money you're making, where your expenses are going, and whether you need to adjust your pricing or cut back on expenses.
Cash Flow Statement:
The cash flow statement shows how much cash is coming in and going out of your business over a specific period of time. Your bookkeeper should prepare this report for you on a monthly basis.
Example: Let's say you own a restaurant. Your cash flow statement would show your cash inflows from sales, as well as your outflows from food and labor costs, rent, and other expenses. By analyzing this report, you can see if your restaurant is generating enough cash to cover your expenses and whether you need to adjust your prices or cut back on expenses.
Accounts Receivable Aging Report:
The accounts receivable aging report shows how much money your customers owe you and for how long they've been outstanding. Your accountant should prepare this report for you on a weekly or monthly basis.
Example: If you own a construction company, your accounts receivable aging report would show how much money you're owed by each client and how long each invoice has been outstanding. By analyzing this report, you can see if you need to follow up with clients to collect payments or adjust your payment terms.
Accounts Payable Aging Report:
The accounts payable aging report shows how much money you owe your vendors and for how long those debts have been outstanding. Your accountant should prepare this report for you on a weekly or monthly basis.
Example: If you own a manufacturing company, your accounts payable aging report would show how much money you owe to each supplier and how long each invoice has been outstanding. By analyzing this report, you can see if you need to pay your bills on time to avoid late fees or negotiate better payment terms with your suppliers.
Budget Variance Report:
The budget variance report compares actual financial results with the budgeted figures. It helps business owners assess the effectiveness of their budgeting process and identify areas where actual expenses or revenues deviate significantly from expectations. By understanding these variances, owners can make timely adjustments to their financial plans and take corrective measures if necessary.
Epilogue:
These 6 essential reports are crucial for the financial health of your business. By working with your bookkeeper to prepare these reports on a regular basis, you can gain valuable insights into your company's finances and make informed decisions about your business's future.
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