While producing goods and services and optimizing the customer experience should be top priorities, there’s something else that needs your attention. The number one reason that small businesses fail is financial in nature, so your company should pay close attention to its numbers.
Sure, paying taxes on time is important, but so is keeping your finances organized. Your company will have a better chance of beating the odds and achieving its goals if it keeps a close eye on these five accounting reports.
1. Profit and Loss/Income Statement
The most important accounting report for your business is its income statement, also called the profit and loss statement or P&L. This report tells you how much money you’re making as well as some other vital data.
Many businesses make money from a variety of sources, and this statement can tell you which revenue streams are more profitable than others. You can also use this report to identify trends, which can be trouble spots or opportunities to capitalize on more profitable areas of business.
2. Balance Sheet
Your company’s balance sheet provides a snapshot of what your business owns at a single point in time. For small businesses, assets generally include such things as accounts receivable, bank accounts, property, inventory, and equipment. Liabilities might include things such as business loans, credit lines, and anything else that you owe.
Your balance sheet will “balance” based on the formula: Assets – Liabilities = Equity. In short, the difference between what you own and what you owe should always be a positive number.
3. Accounts Receivable Aging
You didn’t open a business to give products and services away for free. Once you send an invoice to a client, you might find yourself in a battle to collect payment.
Your accounts receivable aging report can help you track where you are at with unpaid accounts. If you have clients that are routinely late or taking advantage of your business, it might be time to create some new policies.
4. Revenue by Client or Customer
Just as important as who owes you money, is who is paying you the most cash for your products and services. This report will help identify your top customers over a given period.
It takes more time, effort, and cost to attract a new customer than to keep the ones you have. Use this information to create the strongest relationships possible with these clients so you can retain them as customers.
5. Accounts Payable Aging
That accounts receivable aging report told you which of your clients are slow to pay. They’re probably not your favorites. As someone who is a client yourself, don’t be that business.
Use accounting reports like this help to make sure you are paying your own bills on time and creating strong partnerships with other companies. If you fail to pay a critical bill, you might find that your suppliers, utility providers, or insurance carriers have inconveniently cut you off.
As a small business, it can be challenging to take care of daily operations and stay on top of money matters at the same time. While this is a necessary component of financial success, you don’t have to do this alone.
Nolan Accounting Center not only provides its clients with tax preparation services but we also help small businesses reach their goals with our accounting, bookkeeping, and payroll services. We serve clients throughout the Greenfield area. Contact us today for more information about our services.