Wouldn’t it be nice to know what to expect in your business? Unfortunately though, there is no crystal ball to tell you the future.
But, there are other tools that you can use to understand more about what is happening in your operation on a daily, monthly and annual basis.
And those tools don’t require magic!
In fact, they are some of the most practical tools your business can utilize.
What are they? Well, it’s your monthly reports.
These financial reports can give great insight into what is happening in your business and what might be going to happen in the future.
So, let’s find out more about what they are and how they can help you run a successful business.
What Are Monthly Reports And How Can They Help Business?
What Are Monthly Reports?
Monthly reports contain a summary of your business’ financial performance for a specific period – usually a month; hence the name!
Normally run at the beginning of a new month, Monthly reports summarize previous month’s activities, helping businesses assess financial position, track progress, and identify areas for improvement.
These reports can really help you to get insightful monthly reports provide accurate financial information, empowering informed decision-making and deeper understanding of your business operations.
We all know that it is a legal requirement to have accurate financial records. But it is even more important to have these monthly report records on hand if you are planning to sell your business or want to find an investor.
Types Of Monthly Reports
Right, so now that we know these reports are important, let’s look at the specific reports that you should be running each month.
There are three key statements:
Balance Sheet
The Balance Sheet shows the financial position of your business at a specific point in time. It lists your company’s assets, liabilities and equity for a set period. As the Balance Sheet is part of your monthly reporting suite, then that set period will obviously be for the month prior.
The assets are the things your business owns, including things like cash, expected accounts receivable funds, vehicles, inventory, property, equipment and intellectual property. Liabilities are the obligations your company has and Equity is owner investment. Liabilities include debts the company owes (like loans), salaries, accounts or taxes payable. Equity includes money the owner (or investors) have put in, retained earnings, or shares.
Your company’s financial situation is displayed on the balance sheet, along with a determination of your ability to pay your debts. It keeps tabs on your financial progress so you can decide if you have enough money for growth or investing in the future.
Why is it called a Balance Sheet? Well, the idea is that all three aspects should balance. So in theory, your assets should match your liabilities and equity.
Profit And Loss
You can learn more about the financial success of your company for a specific time period by consulting the profit and loss (P&L) statement, commonly referred to as an income statement. Once more, the P&L should be run monthly for our purposes. For a higher level view, it can also be run for different frequencies like quarterly and annually.
The Profit and Loss statement also has three separate parts:
- Revenue
- Expenses
- Net Profit
Revenue is the money that you earn from all sources. It is your earnings before any expenses have been paid. It can be amounts you invoice, recurring figures, or any other form of earnings. Expenses are the money you spend on things like stock, rent, utilities, insurance, contractors, labour etc. And your Net Profit is your business’ bottom line. It is the money that is left once you have paid your expenses and taxes.
By looking at all three of these aspects, you can track how your business is operating and see any changes or patterns that might be forming.
Cash Flow Statement
The Cash Flow statement is a summary of the cash transactions that happen in your business over a set period of time – again, we suggest monthly.
It tracks the money that is coming and going from your business. It gives you the same base information as your bank statement, but it goes into more depth, allowing you to gain insight into patterns or problems your business might be experiencing.
Compared to other reports, which show money still coming in or expenses still owing, it is an excellent report for letting you know how much money your company has accessible at any given time.
The Cash Flow statement is particularly important if you want to borrow money, attract an investor or prepare your business for sale. That’s because it shows trends in your available cash and whether they are going up or down.
Running Monthly Reports
As you can see, monthly reports have a goldmine of information within them. But, these reports will only be useful if your financial data is accurate.
If numbers aren’t your thing (or you don’t have time to make them your thing), then you’ll definitely want to have a reliable bookkeeper to ensure your finances remain in order. Your bookkeeper will also be able to run your monthly reports and give you valuable insight into what the reports are saying about the financial position of your business.
Here at Admin Army, our expert bookkeepers wage war on all your finance tasks to ensure your records are kept with military precision! So, if you need some help with your bookkeeping and monthly reports, chat with our team today.