Five Key Accounting Reports You Might Not Know of
While we all have to keep our monthly books up to date for tax and other compliance reporting purposes, your accounting efforts should never stop there. Your books hold a wealth of data that you can use to run your business better. Below, we outline five reports your business should never be without.
Budget-to-Actual Profit and Loss Statement
Hopefully, you’ve already seen how powerful the Profit and Loss Statement is. We can take it to a deeper level, though, by adding in budget comparison. With this upgrade, you can now plan your way toward the sales and profit figures you want. As a result, you’ll know every month whether you’re on track, ahead of the game, or need to hustle to close the gap next month.
Most accounting systems allow you to enter monthly budget numbers for your sales and expense accounts. Imagine that this is the financial equivalent of Google Maps, and your business is a cross-country journey. You will be able to see where there is construction and traffic so that you can adjust your route to one more favorable. You can also see where there are cool opportunities ahead and plan accordingly to take advantage of them. Remember: your numbers tell a story.
Actual-to-Prior-Year Profit and Loss Statement
An actual-to-prior-year P&L Statement is an easy report to generate, so long as you have at least two years’ worth of information in your accounting system. This report allows you to compare your business’s results for this year alongside last year’s. Are you ahead? Behind? Have new products and services? New employees? New expenses?
With this comparison, you can take action based on how you would like your business to perform this year versus last year. Unfortunately, while this report is readily available, few companies study it to glean the insights available. Make sure you’re one of them and spend some time analyzing the data in this report.
Sales by Item, Customer, or Division (or All Three)
Inside every business’s sales information is a treasure trove of possibility. Where do you see growth, and how can you capitalize on it? Conversely, where do you see a slowdown, and can you run a promotion to juice things up?
Choose the breakout – customer, item, division, or another – that is meaningful to your business type. Then, if possible, arrange for a searchable database so you can drill down into the detail even more. What trends do you see? What opportunities do you see?
To obtain more information about your profitability and get into the details of how your expenses match up with your sales, you need to review your operational accounting reports. The precise report will depend on your business type. For example, if you are in services, you’ll need payroll reports and timesheets; for retail, inventory reports; construction, job costing reports; and manufacturing, cost of goods sold.
The last report that is essential for good business management is all about cash. There is more than one option here, and these reports can include Accounts Receivable Aging, Accounts Payable Aging, cash flow forecasting, and various cash flow reports.
If you grant customers credit, you’ll want to actively make sure that money is collected on time from customers. If customer balances get too old, action must be taken. Even if you don’t grant credit, transactions such as returns, expired credit cards, and bounced checks need special attention.
The same is true for amounts you owe to vendors with the Accounts Payable Aging report.
If you run tight with your cash balance, you may want to have a cash flow forecasting report on hand. This report gives you good warning as to when your bank balance may dip below your needs. You can then delay vendor payments or find an infusion of cash to cover the shortfall.
With these five categories of reports, you will have dozens of opportunities to run your business more proactively and improve your bottom-line results. If we can help you find or generate any of these reports, please reach out anytime.