Two more financial statements to add to your arsenal

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To get a truly clear picture of your business’s financial health add these two financial statements to your arsenal.

In my previous post I introduced what I consider to be the three most important financial statements every business owner should be reviewing on a regular basis.  They are the Income Statement, Balance Sheet, and Cash Flow Statement. This practice allows you to have confidence in the accuracy of your numbers and foresee potential problems.  In that same post I also suggested that it is prudent to conduct a more indepth review of your finances annually, if not quarterly. To do that, you should also review the following reports.

ACCOUNTS RECEIVABLE AGING REPORT ~

Poorly managed accounts receivables is a common source of cash flow problems.  This can be especially true for small businesses. Think about it. If your customers aren’t paying you, how are you going to pay your suppliers?  Reviewing this financial statement will help companies proactively manage your collections process.

BUDGET vs ACTUAL REPORT ~ 

Please tell me you have a budget.  If not, we should talk! Growth doesn’t happen without planning.  Just as you created a personal budget so you could save to buy a home, you need to do the same to reach your business goals.  The comparison of actual income against your budget allows you to identify areas that were over and under budget and adjust accordingly.

A proactive approach to your business finances prepares you for growth and unforeseen obstacles.  You are more likely to succeed when you are armed with accurate numbers and an understanding of their meaning.

Like everything else in QuickBooks (or other software) creating the reports is easy.  Knowing the data is correct and being able to interpret them is entirely different. If you are unsure about either process, you should seek the help of a professional.  A qualified bookkeeper will provide you with timely and accurate financials and reports as well as the financial analysis you need to guide business decisions.

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