Your business numbers give you a picture of the past operations, but can also help you predict where you are going, and most importantly, correct behaviors to change the results.
What are the most typical Financial reports you need to review with your bookkeeper/accountant?
✔Profit & Loss
✔Accounts Payable Reports
✔Accounts Receivable Reports
Don't panic. Here is more information about these staments:
- Balance Sheet: is a statement of a business's assets, liabilities, and owner's equity as of any given date. A balance sheet gives you a snapshot of your company's financial position at a given point in time. It gives you information on the business resources (assets) and its sources of capital (equity and debt) at a specific point in time.
- Profit and Loss: According to Investopedia, “a profit and loss statement is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year.”. This report is also known as Income Statement and give information regarding the business "results", or the capacity that your business have to create profits, during a specific perior of time, not at a point in time.
- Cash Flow: this report shows the real movement of your money, what actually happened to your "cash" during a specific period. It compile all the inflows (sales, collected funds, loans, all the money in) and the outflows (expenses, loan payments, payment od debts, all the money out) This report can show your business' liquidiy position.
- Accounts Payable Reports: this report includes all your debt. It helps you track all business expenses to ensure accurate financial data, and more importantly, when you have to pay them. This report shows your overdue balance to vendors.
- Accounts Receivable Reports: this report provides information on outstanding sales, bad debt, etc at a specific period in time. How much money is owed to you.
The Bottom Line? Financial Statements are a really important tool to manage your business. Why? Beacuse by knowing your numbers you can:
✔Make better investment decisions.
✔Know the financial structure, the company's growth capacity, its stability and profitability.
✔Evaluate the solvency and liquidity of the company and its ability to generate funds.
✔Guarantee suppliers and creditors fair compensation for their investment or allocation of resources or credits.
✔Diagnose the company's ability to generate income from its operating activities.
✔Identify the financial resources of the organization.
✔Show the results of resource management performed by administrators.
Ready to learn more? Comment with your questions.
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