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Cash Management

1 Post authored by: Intuit

By Stacy Kildal

Owner/Operator of Kildal Services

Advanced Certified QuickBooks ProAdvisor

 

Importance of Reporting

You’re a small business owner, so you know that in order to gain insight into (and make decisions based on those insights) how your business is running, you need to read reports. There are so many reports that need to be reviewed, it can be daunting. Which do you need? How often?

 

In an average month, most small business owners are going to need to review and analyze most – if not all – of the reports listed and defined below. Some may be on a daily basis, some just once a month.

 

  • Profit and loss statement – View income and expense summaries for your company or detailed numbers for revenue earned and expenditures paid out
  • Balance sheet – Understand your company’s value
  • Cash flow statement – Learn how well your business’s cash flow can support its debt and obligations
  • General ledger report – Review beginning balance, transactions, and totals for each account in your chart of accounts
  • Customer, job, and sales reports – Keep track of what’s impacting your account receivables and who your repeat or largest customers are
  • Item reports – What’s selling? What’s not? Are certain services or products more profitable than others?
  • Vendor reports – Get a handle on your business expenses and accounts payable.
  • Banking reports – Reconcile all your bank accounts and credit card statements and analyze where all your money lives
  • Payroll and employee reports – Understand how payroll costs are impacting your business
  • Budgeting and forecasting reports – Use these to plan ahead for your company and ensure that you’re on track to hit goals

 

Along with periodically running each of these reports, you can also use them for other evaluations, like a common size analysis, as well as get nice visual representations and
graphs of how your company is performing. These are useful for general financial analysis and for planning with your bookkeeper, tax preparer, or business consultant.

 

For most small businesses, the first three in the list (the basic financial statements) are a good place to start to get a good understanding of your business’s financial performance – let’s dig a bit deeper into each one.

 

analysis-business-businesswoman-955447.jpg1. Profit and Loss Statement

What is it?

Your profit and loss statement (P&L), also called an income statement, summarizes your business’s financial performance over a period of time—daily, weekly, monthly, quarterly or annually. It is an important document because it tells you the company’s biggest areas of expenditures and revenues.

 

Why is it important?

The profit and loss statement allows you take advantage of opportunities that increase sales and trim back on expenses. You’ll want to review this at least once a month, and definitely before filing your year-end taxes. You can run a standard profit and loss statement which will summarize transactions, giving you totals for each account or a profit and loss detail which shows individual transactions for each income and expense account.

 

2. Balance Sheet

What is it?

A balance sheet is a statement of the assets, liabilities, and equity of a business—essentially a “snapshot” of your business value at a specific point in time. Balance sheet items are calculated by subtracting your liabilities—what you owe—from your assets, cash, or property—what you own or is owed to you. The result is equity, or what your company is worth.

 

Why is it important?

A balance sheet is useful to see your financial health and for banks when you are applying for loans. It’s also essential for the small business owner to get a true sense of how their business is doing.

 

Just as with a profit and loss, the standard balance sheet is fine, but I recommend pulling the balance sheet detail and sending to your tax preparer each quarter (along with your P&L) for review and tax planning. As you can guess, this is a more detailed version of the standard balance sheet, showing the starting balances at the beginning of last month, transactions entered in for the month, and ending balances.

 

3. Cash Flow Statement

What is it?

A cash flow statement, or statement of cash flows, shows the amount of cash that flows into your business from a variety of sources and flows out of your business in a given period of time. Statement of cash flows is important because it shows your company’s actual cash position to fund operating expenses and debt obligations. The liquidity of your company will be illustrated in a statement of cash flows.

 

Why is it important?

Depending on your accounting method, you might record revenue at the time of a sale or when your customer actually pays. You can specify your accounting method in your accounting software, making it easy to get a handle on your cash flow.

 

Financial Statements: Analyze Your Business’s Financial Health

The most commonly used financial statements are the profit and loss, balance sheet, and cash flow statement. Accounting software such as QuickBooks Online can also help you get organized and understand your business with dozens of reports organized in a way that makes them easy to find, customize, and run regularly.  Combined with the tips here, small business owners – new and seasoned – can be sure to always have the info you need to help run your business better!

 

 

 

Bank of America, N.A. engages with third-party contributors to provide materials for informational purposes only, and is not responsible for, and does not guarantee or endorse any of the third-party products or services mentioned.  All third-party logos and company names mentioned herein are the property of their respective owners and are used under license from their respective owners.

 

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