Top 5 Accounting Reports For Small Businesses

Keeping on top of a business’s finances can help you identify potential issues before they turn into major problems. This is why putting in place effective accounting reports allows you the best chance to plan successfully for the future of the business.

But not everyone has the capacity to maintain clean books and up-to-date financial information. And you may not be aware of exactly how the most fundamental accounting reports can benefit a business.

Let’s explore some of the top account reports that can transform any business, and what solutions you have if you’re struggling to keep on top of your books.

Assessing the financial health of the business

Profit and Loss Statement

WHAT IT DOES – Arguable the most important accounting report for any business, your profit and loss (P&L) statement provides clear indication of the financial health of the business. Also known as the income statement, a P&L statement indicates a business’ revenue, costs, and expenses over a specified period of time, helping you to easily calculate your overall profits or losses.

A P&L statement is typically completed on a yearly, quarterly, or monthly basis, and should include your revenue, cost of goods sold (COGS), gross profit/loss, expenses, additional income, tax, and your net profit or loss for every dollar spent.

HOW IT BENEFITS THE BUSINESS – You can utilise your P&L statement to track your ongoing expenditure as well as observe trends and results around your business profits. It can help to show a business’s ability or inability to manage expenses, generate sales and create profit, and highlight areas where they may want to reduce costs and/or increase revenue. By calculating whether your business is making a net profit or loss, you can better understand the financial health of the business and plan and adjust accordingly.

Balance Sheet

WHAT IT DOES – A balance sheet, also known as a statement of financial position, is a report that indicates your total assets as well as your total liabilities at a set point in time. The assets may include your accounts receivable, property, machinery, and equipment, as well as computers and other technology. The liabilities may include any business loans, credit cards, and other debts.

HOW IT BENEFITS THE BUSINESS – A balance sheet is an effective way to assess the business’s net worth and can be crucial in internally guiding business decisions. It is also used to report your financial status to lenders, investors, and stakeholders – particularly when seeking external funding. It can also be helpful if you have payments due for said liabilities in assessing the liquidity of your assets, as you don’t want to be caught short due to stagnant cash flow…

What is owed to the business and what you owe

Accounts Receivable Aging

WHAT IT DOES – The accounts receivable aging (AR) report indicates what is owed to you by your customers, i.e. your outstanding invoices. It provides the business with a clear outline of which payments are due and by when, as well as identifies potential risk clients with overdue invoices. The time frames are typically; current invoices within terms, invoices 1-30 days past due, invoices 31-60 days past due, invoices 61-90 days past due, and invoices more than 90 days past due.

HOW IT BENEFITS THE BUSINESS – Unpaid invoices are one of the biggest contributing factors to poor cash inflow, which can adversely impact any business, especially in terms of taking on new projects, increasing your supplies or even purchasing new equipment. This is why an AR report can be crucial when forecasting your cash flow. Further, an AR report can help you identify your customers that are falling behind on their payments so you can make moves to rectify this issue.

Accounts Payable Aging

WHAT IT DOES – The accounts payable aging report outlines what the business owes and to whom, as well as the due dates of these invoices and bills. Similarly to the AR report, your due payments are organised into separate time frames, typically representing different 30-day periods.

HOW IT BENEFITS THE BUSINESS – The AP report assists a business owner or CFO in recognising and planning for payments due. This can be beneficial for the handling of cash flow and identifying where to direct funds and by when. You’ll also be able to assess which invoices to pay first, particularly if you’re looking to secure a client relationship and avoid the sting of a late payment. You can also use this report to help plan for future expenses of the business and better outline a business budget.

Cost of your customers

Customer Acquisition Cost

WHAT IT DOES – As the name suggests, the customer acquisition cost (CAC) report is a metric that allows you to calculate how much the business is spending to convert prospects into new customers. This is typically done by dividing the cost of sales and marketing by the number of new customers acquired in a set time period.

HOW IT BENEFITS THE BUSINESS – The CAC can be useful in allowing the business to identify how much they are investing towards gaining new customers in order to achieve maximum profitability. If too much of your revenue is being spent acquiring new customers, then you may need to change your sales tactics or your pricing, invest in your marketing and shift your overall budget. The CAC assists you in understanding whether the business is appropriately spending its money to acquire new customers, and ultimately, what your return on investment is.

The Benefits of Outsourcing Your Bookkeeping

Without implementing some of these fundamental financial reports, a business may not be able to track its growth and plan for the future. However, not everyone has the capacity to keep on top of all of these reports. This is where it may be beneficial to outsource your bookkeeping…

We spoke with hammerjack client, Kamper Chartered Accountants, to discover how seeking support with their reporting and bookkeeping has significantly helped their business.

Prior to outsourcing this function to hammerjack, they were starting to struggle with the consequences of clients’ inaccurate reporting, including “uninformed decisions”.

“Many people don’t accurately calculate their liabilities, or manage their cash flow appropriately, especially if they’re growing, or suffer a loss of revenue. There is a tendency to not appropriately budget,” said a Kamper Chartered Accountants spokesperson.

“Businesses need live, up to date, consistent reporting monthly as a minimum. Reporting should include, balance sheet, cash flow, upcoming statutory requirements, and a simple budget as a minimum,” the spokesperson said.

Growing a healthy business requires having the right systems in place. But if your finding keeping updated records and maintaining clean books is extremely taxing and time consuming, it may be worth considering outsourcing.

As an outsourcing partner, hammerjack can ensure that not only are the fundamental accounting reports being regularly maintained, but that the best and most helpful infrastructure is in place. This ensures that business needs are being met and the reporting results are effectively communicated to you, so that the business can budget, forecast, and plan for the future.

Let specialists handle these reports and documents so you can get back to business. Access the best offshore accountants, the smartest processes, and latest technology offshore for a fraction of the cost. For the remainder of 2021 receive a FREE 30-day risk-free trial of our Bookkeeping solution. Check the details here.