Small business owners must keep that accounting records straight and updated so that there is much clarity about taxes. But taxes are one of the many reasons for small businesses to maintain proper accounting records, John Giorgi. To know the business’s health and monitor its performance, business owners must rely on the accounting records that accumulate all data about business transactions at all levels, explains John Giorgi.
However, Having a tab on the business data helps in effective decision-making that supports business growth and expansion. In addition, analysis of the accounting data reveals the company’s strengths and weaknesses so that owners can take timely action to address issues that stall the business’s progress.
Here are some accounting reports that are must-have for small businesses about which the business owners must understand.
- Income statement / P& L (Profit & Loss) statement
The profit and loss statement is one of the most critical business accounting reports, which tells you about the business earnings and a lot more. Also known as bookkeeping, the report carries details about the sources of money inflow and the heads of expenses. The report provides all details about the sources of income like the sales figures, earning from rent, travel expenses, advertisement spending and the cost of communications and internet. The income and spending categories will vary according to the types of businesses.
However, A monthly review of the report helps to compare results with some earlier periods and look at trends. In addition, it will tell you what is working well and the bottlenecks so that you can take corrective actions.
- Balance sheet
To understand what a business has and what it owes at any given time, you must look at the balance sheet, which is like a snapshot of the business performance. A balance sheet includes all data about assets and liabilities. Small business assets include bank accounts, any investment account, and accounts receivables along with other movable and immovable assets like plant and machinery, nailing and other properties, computers, etc. The liabilities consist of anything that the business owner owes business loans, and credit cards. The balance sheet helps to determine the business equity, which is the sum of assets and liabilities.
- Revenue by customer
You must know the customers that pay most and is an important source of revenue generation. The revenue by customer report lists the contribution of each customer during a specific period. Across some industries, many businesses rely heavily on repeat business. Building good relationships with premium clients can ensure a steady and reliable income stream. However, do not rely too much on any one source as it can be s bad as putting all eggs in one basket.
- Accounts receivable aging
Selling and raising an invoice is important, but collecting the outstanding amount on time is critical to maintaining a steady cash flow. How well your collections are reflects in the Accounts receivable aging report. Identify the laggards who habitually pay late and other customers who are likely to join them.
- Accounts payable aging
This report is a list of vendors whom you owe and the amount. Monitoring the list ensures that you do not default in paying your vendors on time.
These 5 tips will help you get started and manage your business efficiently.