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The 5 Must-have Accounting Reports for Your Small Business

By Analytix Editorial Team

September 21, 2020 0 Comments

As small businesses prepare to reopen after the COVID-19 pandemic, it is prompting many to re-examine their small business accounting strategies. While most small business owners are excellent at what they do, the task of managing finances, especially in these unprecedented times can be challenging. Many of America’s small business owners are thinking about how they can ensure the long term financial health of their business to thrive and survive in the new normal. According to a Small Business Coronavirus Impact Poll conducted by MetLife & U.S. Chamber of Commerce, more than 70% of small businesses are concerned about the financial hardships arising due to prolonged closure.

As small businesses brace for a prolonged crisis, many are in need of comprehensive guidance and tools in helping to identify key areas to which they should pay attention.  Access to timely, accurate, relevant data about the business’s operations and financial status can be critical to its survival.  During these times of uncertainty, business owners need to closely monitor information and insights so that they can react quickly to changes in their business’s performance.  Solutions that addresses back office tasks, provide timely and relevant data about the business, and increase the efficiency of daily accounting tasks can prove invaluable, as it frees up the owner’s time to focus on running the business.

Below we explore five of the most important accounting reports that can help you make more informed business decisions. These reports should not be viewed as stand-alone data, but rather in conjunction with other reports as they each provide a critical piece of the larger picture.

1. Profit and Loss Statement

The P&L or income statement shows how much revenue your company earns over a specific time period, usually a month, quarter or year. As the name suggests, this report indicates the profitability of a company. Reviewing reports on a month-to-month basis or even a year-to-year basis to track profitability shows the progression of the business’s health

The P&L is a vital report used by both internal and external stakeholders to assess profitability, and by investors to assess the level of risk. However, the P&L is best analyzed in conjunction with the balance sheet to show a more complete picture.

2. Balance Sheet

A balance sheet tracks the assets you have, the money you owe, and the equity you’ve created by investing in your business. This financial statement summarizes your company’s total assets, liabilities, and shareholder equity. It presents your company’s financial position at any point in time. The balance sheet is used alongside your income statement to demonstrate a more complete snapshot of your business as a whole, conduct fundamental analysis, and calculate financial ratios that provide a metric for assessing the health of your business. Furthermore, a balance sheet also provides a basis for computing the rates of return, the company’s creditworthiness to creditors, and evaluation of its capital structure.

3. Cash Flow Statement

More than profitability, your business’s success depends on cash flow, and therefore the cash flow statement provides another important perspective along with the income statement and the balance sheet. The report presents the cash that flows in and out of your business during a given time period and allows you to see if you are actually earning cash. The cash flow statement tells you where the money went and provides additional key performance indicators (KPIs). It gives you a more accurate understanding of your company’s cash flow position and is helpful in budget planning and decision making.

4. Accounts Receivable Aging Report

An accounts receivable aging report categorizes receivables due from customers according to the length of time an invoice has been outstanding. The report breaks down receivables due from all customers into different aging categories such as current, 1-30 days, 31-60 days, 61-90 days, and over 90 days. It is more likely that the longer a debt is owed, the less likely you are to collect it successfully. Hence, the aging report helps you manage the collection process, gauge the financial health of your company’s customers, estimate bad debts, and determine the allowance for doubtful debts.

5. Accounts Payable Aging Report

The way in which you manage your accounts payable (AP) determines your business cash flow. An AP aging report is an important tool for small and growing business owners so that you know how much you owe the vendors who provide services to you. An AP aging report is usually broken down into 1-30 days, 31-60 days, 61-90 days, and over 90 days. The purpose of this report is to provide a comprehensive summary of all your outstanding expenses and serve as an excellent reference for prioritizing payments to avail early payment discounts and maintain vendor relationships. Small business owners should regularly run an AP aging report every two weeks to monitor expenses and optimize cash flow.

These accounting reports help you make more informed decisions.  They should be a top priority not only during the early growth stages but also when scaling your growing business. Fortunately, with the right tools and platforms, access to these accounting reports no longer needs to be a challenge.

For example, a comprehensive solution like Analytix’s Insight360 offers you a customized portal to consolidate key financial and operational data from various systems.  Industry specific apps and tools, combined with full range accounting services provided by a team of professionals, provide the insights your business needs to remain agile, making pivotal decisions based on what can be rapidly changing data.

Make it a regular practice to review and analyze the key reports referenced above.  Familiarity with the information they provide will position you to make informed decisions quickly as you navigate these uncertain times. For assistance with any of your accounting needs, including business analysis, or for more information on our Insight360 products, email us at [email protected].

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