Our View from

Canal Street

Our View from

Canal Street

Five Key Reports to Manage Your Business

by | Mar 26, 2023 | Accounting, Blog

As a business owner, your days are busy and your weeks are long. Finding (or making) time to review select financial reports to track the health of your business is important. As a business owner, you should review the following five reports monthly. If that is not realistic or makes your head hurt, let’s talk. We can work with someone on your team to generate the reports or work with you to advise you on to how to review and interpret the data.

Five reports to manage your business:

1. Your Balance Sheet

A balance sheet provides a report at a point in time of assets, liabilities, and shareholder equity. We recommend you review your balance sheet, particularly with a focus on current assets and current liabilities. A profitable business should consistently have a larger balance of current assets. If current liabilities are unusually high, you may have a liquidity issue. We can help you interpret your balance sheet and identify steps to take to address the underlying issues affecting the report.

The review of your balance sheet will inform you of your available cash, accounts receivable, and accounts payable. Regular review of your balance sheet will help you identify any unusual variances. If analyzing your balance sheet is not something you have time for or interest in doing, we can review, analyze, and help you leverage your balance sheet to help you manage your business.

2. Accounts Receivable Aging

Actively managing aging receivables is important. This report highlights unpaid invoices, with aging typically over 30 days. Actively monitoring receivables as they age enables you to act before the receivable becomes less likely to be collected. While aging may vary by industry, a general rule of thumb is that an outstanding balance for 30 days or more requires action to be taken. At LCW CPAs, we commonly see that if the money is not collected within the 30-day period, the likelihood of receiving that payment dwindles.

3. Accounts Payable Aging

Accounts payable aging is the exact opposite of accounts receivable aging as this report is highlighting bills that are aging. Bills may get lost or misplaced, so it is a good practice to review this report regularly to maintain relationships with your vendors and suppliers while maintaining the credit of your business. If there is an unusually large number of aging payables, you want to make sure there are allocated funds to pay these liabilities.

4. Income Statement

The income statement or profit and loss statement (P&L) is the report most business owners are familiar with. The first number most entrepreneurs look at on the income statement is profit. It is a good habit to review the P&L monthly and compare to the prior year as a way to gauge how your business is performing. At LCW CPAs we review the P&L by line items to cross-reference the financials of your business.

As a business owner, you may ask yourself:

  • Did I generate the amount of revenue that I expected? If not, should I ramp up marketing for the next few months?
  • Do all of my expenses look reasonable? Are there any numbers that look too high?
  • Are my payroll expenses in line with what I was expecting?
  • Which accounts caused me to generate more or less profit?
  • What I can I do next month to improve performance and increase profit?

5. Sales Reports

The final category of reports to review regularly is sales-related reports. Two common ways to analyze revenues is by reviewing Sales by Item and Sales by Customer. A good sales report shows you what items sold and resonated with your audience and which ones did not. By analyzing product sales, you can easily assess if a recent product promotion was successful and how you can replicate that effort in the future. Analyzing sales by customer provides insight into identifying your top customers (always important to know), as well as identifying if your business is overly reliant on the sales to a small group of customers. Developing strategies to retain your top customers should be a priority as well as diversifying your customer base by working to attract new customers to minimize risk on a select few.

Finding time to generate and review these five important reports may feel overwhelming or unrealistic to you as a business owner. We understand that you are wearing many hats and that financial reporting analysis may be one you choose not to wear.

There is an opportunity to improve cash flow by collecting more receivables or increasing sales by review of these reports. If you would like to discuss us taking the reporting and analysis burden off your plate, please call or contact us. We’re happy to help set up the reports, train a staff member of yours, or complete the review and analysis for you.