The 5 Most Important Financial Reports for Your Small Business
When it comes to small business accounting, most people know that it is
important to keep your records updated for taxes. However, there are
many more benefits from small business accounting that
you can use to grow, improve and expand your business. Here are some of
the most important accounting reports for your small business that you
should know about.
Profit and loss statement/income statement:
The most important report for any business is the profit and loss
statement, also called a P&L or income statement. This report tells
you how much money a business makes, as well as a lot more. A well-run
bookkeeping operation includes details for where you spend and where
your money comes from. For example, I can look at my P&L for a quick
summary of how much I make from writing, how much I make from
advertising, how much I spend on business travel and how much I pay for
computer and internet costs. Each business would have different accounts
for its own income and spending categories.
Balance sheet:
A balance sheet gives you a snapshot of what a business has and owes at
any given time. For small businesses, assets typically include things
like bank accounts, accounts receivables, and possibly an investment
account. A balance sheet may also include assets like property,
computers, equipment and other saleable physical and intangible
property. Liabilities generally include things like credit cards,
business loans and anything else your business owes.
Accounts receivable aging:
You don’t work for free, and your business isn’t a charity. Doing the
work and sending the invoice is just part of the battle. You also have
to make sure those payments get paid and collected. Your accounts
receivable (A/R) aging report tells you how well you are doing on the
collections side. Look out for customers who are perpetually late,
usually pay on time and recently started paying late, and growing late
balances from any customer.
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