Financial experts advise businesses to balance routine annual audits and intrusive, compulsive audits. Key accounting reports, usually available through your accounting software or financial reporting tool, may provide the insight you need to steer your company in the right direction.
Financial reports summarise your company’s past transactions and where it stands today. After all, you can’t do financial forecasting unless you know what’s coming in and what’s going out. If you want to know if you should hire a new employee, buy new equipment, or launch campaigns, you need an answer to questions like:
Are you doing better or worse than last year, quarter, or month?
Do you know which products, services, and customers account for most of your sales revenue?
How much have you spent in the last month, quarter, or year on equipment, online services, utilities, and other business expenses?
Your financial reports are here to help you in this situation.
Although your financial reporting tool may include several useful financial reports, the ones you’ll want to review regularly are as follows.
REPORT ON PROFIT AND LOSS (P&L)
This is your profit and loss statements for a specific period. This report is also known as an Income Statement by CPAs.
BALANCE SHEET
Your business’ financial status, including assets, liabilities, and equity, is summarized here.
CASH FLOW REPORT
This is an overview of your company’s cash inflows and outflows. A cash flow statement is another name for a cash flow report.
GENERAL LEDGER
The general ledger is a central document that contains a complete record of all the accounts used by a company, divided into three categories: assets, liabilities, and equity.
TRIAL BALANCE
This is the balance in each of your General Ledger accounts. Debit balances are listed in one column, while credit balances are listed in another. The sum of each should be the same.
REPORT ON ITEM SALES
How much money you make from each item you sell and how many times you’ve sold it.
EXPENSE REPORT
The expense report is a detailed breakdown of your expenses, including applicable taxes.
Many business owners rely only on financial data when preparing for tax season. Because of this, it’s understandable. A company’s operations would be impossible without strict adherence to regulations.
Financial reports, on the other hand, can assist you in preserving the soundness of your company’s finances and its cash flow. Forecasting and prudent business judgments are made possible through these tools. As a result, it is necessary to look beyond simple compliance reporting.
However, you can look back at the past to see what’s going on now. And you can gather insights based on the trend analysis you’ve performed.
Look at your financial records and check if your firm has doubled in volume over the past several months. If so, you may need to hire an additional employee.” In those months, you can monitor how much revenue increases and prepare for the number of employees you need.
Accurate financial reporting using a tool like Performance Canvas can uncover trends that assist organizations in building budgets, setting goals, and helping them better prepare for the future.
When Is It Appropriate to Check Your Financial Reporting Statements?
Even if you want to stay on top of your company’s finances, you don’t have to read every financial report daily to succeed. You can check specific information frequently to keep your ship on course.
Reports like your Item Sales Report and Expense Report should be reviewed daily. It’s not always necessary to go over your finances daily. However, if your company generates revenue daily, looking at your sales data could be an interesting exercise to check in on your financial goals. This helps you make adjustments as you go. The more frequently you check it, the easier it is to see if you’re straying.
The same is true for expenses—and anything else you’re attempting to monitor and maintain.
When it comes to a weekly review, having a good understanding of your company’s cash flow is beneficial. Cash reigns supreme. You have to keep an eye on it, especially when the economy is volatile. You want to know what’s coming in and what’s going out.
While reviewing historical cash flow figures, consider your cash flow in the next two to three weeks or months. Use this data to determine whether you’ll be able to meet your account payables. Otherwise, you can begin strategizing.
Take some time to look into your financial statements, such as your Balance Sheet, Profit and Loss Statement, and General Ledger. It’s also good to make comparisons when looking at the financial statements. This month’s results are compared to the results from last year and from the same period of time last year. This will depend on your business and what you think is the best comparison.
Double-check your General Ledger to ensure all debits and credits are assigned to the correct account before proceeding.
While some of these reports may be repetitions of your daily, weekly, and monthly financial check-ins, it’s crucial to look at them differently each quarter. Over time, you’ll discover tendencies in these reports. This data can inform your marketing efforts and reevaluate your present clients.
Learn why Performance Canvas is the best choice if you’re looking for a reliable financial reporting tool equipped to give you all the insights you need to drive your business forward.
