Reporting For Business
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Regardless of a company’s size accounting reports are an important element of business. Reporting is important as it provides information to calculate tax and track the financial health of your business.
Accounting reports are incredibly important for small businesses as there is a smaller margin for error. While a larger business could make a $2,000 mistake and not collapse financially, a smaller business may not survive.
If you are looking to expand your business either through loans or by bringing in investors you will need to provide financial information that shows your business’s financial performance over different periods. Some reports can be used as a basis for future financial projections.
Importance of Financial Reporting
- Monitors Income and Expenses
- Communicates Essential Data
- Supports Financial Analysis and decision making
Types of Reports
The most common reports that a business would usually use are:
Profit & loss Report / Income Statement
The P&L details revenue earned and expenses paid during a specified period.
Balance Sheet
The balance sheet shows a snapshot of your business at a specific time and includes Assets, Liabilities and Equity balances. It is used to measure the liquidity of a business and will indicate if a business has become insolvent.
Cashflow Statement
The cash flow statement shows how well a business is generating cash, this report can be used to show where cash is coming from and where cash is going. This can include:
Business Operations includes accounts receivable and payable, Inventory, Wages, Income tax and Cash Receipts
Financing includes payable dividends, cash from investors and shareholders’ cash payments
Investments includes asset sales, loans, purchases of equipment and office space or property
Aged Receivables
An aged receivables report shows the unpaid invoices along with how long they have been outstanding. This report helps businesses identify invoices that are overdue and helps them to keep on top of slow paying customers.
Aged Payables
An aged payables report shows how much is coming due in the next period or how much your business has outstanding .
Financial reports are used by many people within a business and reporting is an integral part of a business’s processes. Reporting helps you keep track of business transactions, maintain a budget, predict cashflow and forecast revenue. The more accurate the reports the better the projections will be. Good bookkeeping helps financial analysts understand and interpret data. To do this they use several tools: a good accounting software and data visualisation tools.
Software like Xero, Freshbooks or MYOB will help you in the bookkeeping activities of your business. Combining accounting software with data visualisation tools will bring your insights into focus for operations and translate them into actionable intelligence.
