Financial reporting is a key metric all small business owners rely on to measure overall organizational health and make better decisions.
But, the whole process can be a whole lot overwhelming and confusing. So having knowledge of all business reports is a must. The first step to ensure accuracy is investing in good financial reporting software and then deriving insights from the report.
1. Balance Sheet
A balance sheet gives you an overview of your company’s finances. In this, the liabilities and equity are equated to assets. It is extremely important for both small businesses and enterprises. While this does not give you any future insights, it is good to have a complete picture of your finances at a given moment in time.
2. Income Statement
An income statement is made to assess whether you made profits or lost money. The objective for the same is to check upcoming sales and expenses and then come to a net profit figure. This report uses the gross profit to calculate your total profits. This means things like raw materials, overhead costs, and payroll taxes are all considered.
3. Cash Flow Statement
Similar to a profit and loss statement, you can easily generate a cash flow statement with free online billing software. However, this statement throws light on the money coming and going out of business at any given time to gauge the effect of daily operations on businesses’ overall financial positions.
Ideally speaking, you should prepare this statement on a monthly basis. This is because inventory is purchased, and expenses are settled on a monthly basis. These statements consider three kinds of cash flows, namely investment opportunities, bank loans or venture capital and those from operations.
4. Accounts Receivable Aging Report
Poorly managed accounts receivable (AR) is the main cause of cash flow issues for all businesses. Thus, it is important for you to identify slow-paying customers immediately. When you refuse to serve such customers, you protect your business from being taken advantage of and guard your financial interests. You can set a fixed time for overdue payments and then charge late payment fees. Ideally, you should run this report a week to sort out collections.
5. AR Days vs AP Days Report
Accounts Receivable Days is the number of days it requires a business to get payments for their services or products. On the other hand, Accounts Payable Days are the average number of days you take to pay your suppliers. Calculating it will help you find out total cash availability. This ratio can vary from industry to industry, and you can choose to compare it to get a better idea.
5.Net Profit Margin and Time Report
This report gives you the number of cents in profit that you generated from every dollar in sales. A point to be noted here is that there can be substantial variation in net profit margin across industries. Moreover, it can vary seasonally too. So you will need to track trends over time.
Analyzing net profit margins on a quarterly basis will help you manage costs, keep a check on expenses, and streamline sales functions. All you need is free online billing software to generate these reports and achieve all your business objectives.
6. Budget vs Actual Report
When you compare actual spending to your budget and revenue to your sales projection, you open a host of opportunities and see how you can improve your budgets in the future.
Understanding areas where overspending can help you either cut down on waste spends or increase its scope in the future. At the same time, identifying areas where spending falls short of budget amounts can help you plan better for growth activities. This could include hiring more personnel or upgrading your financial reporting software.
A Budget versus Actual report should ideally be compiled when budgeting occurs to boost the process. Overspends must be addressed on an immediate basis. Besides, unspent funds can be carried over to cover up for other revenue-driving activities.
These were some of the financial reports you must make for your startup. The best part is that you can make all of them using free online billing software and even ease the burden of your admin department.
With key information at your hand, not only will your business be profitable, but you will also be able to work on issues that require more attention. So, invest in good financial reporting software and see your business growing leaps and bounds.