Are you tired of feeling intimidated by financial reports? Don’t worry, you’re not alone! But what if we told you that taking a closer look at those reports could actually help your business reach new heights? By diving into the nitty-gritty of your company’s financial performance, you can uncover key insights that will inform smart decision-making and boost your bottom line.
From untangling complex financial jargon to streamlining payment processes and reducing debt, there are countless benefits to exploring your organisation’s financial reports. In this blog post, we’ll walk you through six reasons why delving into financial reports is crucial for any company, no matter their size or industry.
Before we dive into the six reasons why you need to pay attention to your reports, let’s make sure you know which reports to keep your eyes on. Whether your business is a simple lemonade stand or a multifaceted corporate empire, don’t forget to regularly check out these essential reports:
- The Statement of Financial Performance – also known as the Profit and Loss report, P&L or the Income Statement – tells you, as the name suggests, how your business is performing over a period of time, such as a month or a financial year. In broad terms it shows the revenue that your business has generated, less the expenses for that same period. In other words, it shows how profitable your business is.
- The Statement of Financial Position – also known as the Balance Sheet shows the value of the business’s Assets, Liabilities and Equity.
- Assets include things like money in bank accounts, Plant & Equipment and Accounts Receivable balances
- Liabilities include things like Bank Loans and Credit Cards, Accounts Payable, Chattel Mortgage and Hire Purchase balances
- Equity is the difference between your Assets and your Liabilities and includes Retained Earnings and Owner Funds Introduced
- Accounts Receivable Ageing report or Aged Receivables – this shows how much money is still owed to the business as at a certain date in time, and is usually segmented as to how overdue they are, or sometimes by how far past the invoice date they are. Generally, you will have Current, 30, 60 and 90 days columns.
- Accounts Payable Ageing Report or Aged Payables – this report shows who the business owes money to as at a certain date in time and, like the Accounts Receivable Ageing report, is usually segmented by overdue period.
Here are six compelling reasons why you need to pay attention to those seemingly boring documents:
1. Understand Your Business Better
Take a peek at your monthly Profit and Loss report and you’ll see it holds the key to understanding how your business is slaying or slacking off. Not only will it help you see what’s contributing to your mad profit skills, but also give you the inside scoop on expenses. Comparing periods or delving into monthly P&L will have you doing the happy dance as you easily spot trends and outliers. No more mystery numbers!
2. Accurate Information for Lending Purposes
If you’re applying for a loan or an overdraft, buckle up because the bank is going to take a deep dive into your Profit and Loss report and your Balance Sheet. These documents hold the keys to unlocking the mysteries of your business and can reveal a lot about your finances. But don’t worry, if you’re struggling to make sense of those accounting terms, we’ve got you covered. Give us a holler, and we’ll break it all down for you in simple and easy-to-understand language.
3. Get Paid Quicker and Reduce Bad Debts
Keeping track of your Accounts Receivable isn’t just a boring task – it’s actually the key to getting paid faster! By checking in on those overdue accounts regularly, you’ll catch any potential payment issues before they snowball into bigger problems. Plus, who doesn’t love getting paid sooner rather than later? Don’t let those accounts get out of hand – stay on top of your finances like the savvy business pro you are!
4. Better relationships with your suppliers
Assuming you are entering your supplier bills into your accounting software (recommended for most businesses to get an accurate profitability figure) your Aged Payables report will alert you to any unpaid or overdue amounts. Supplier relationships are an important aspect of your business and paying on time is crucial to maintaining those relationships.
5. Improve cashflow
Knowing exactly what is going in and out of your business’s bank account can be the difference between being flush with cash or barely scraping by. By keeping a watchful eye on your finances, you can make strategic decisions that keep your business thriving. From planning your next killer marketing campaign to ensuring that you have enough cash to cover unforeseen expenses, understanding your business’s trends and finances can help you take on anything that comes your way!
6. Better business decision making
Are you ready for a thrilling tale? It’s the story of your business, narrated through your financial reports. But don’t just skim through it, dive deep and uncover the hidden gems within those pages. Knowing the ins and outs of your business’s financial situation will put you in the driver’s seat to make smart, profitable decisions that will make your business thrive. So buckle up and let’s take a thrilling ride through the world of financial reports!
The Takeaway…
By taking the time to understand your business’s financial reports, you can gain valuable insights that will help you make informed decisions and reach your goals. From understanding profitability trends to staying on top of accounts receivable and payable, looking at financial reports is essential for any savvy business owner or entrepreneur.
Knowing what’s going in and out of your company’s bank account helps ensure cash flow remains positive so you don’t have to worry about unexpected expenses or missing payments. By leveraging the power of these documents, you’ll be able to take control of your finances and create a bright future for yourself – no matter how intimidating those numbers may seem!
If you’re curious about which reports can give your business a boost, or maybe you just want to get a better handle on what’s happening behind the scenes, we’ve got you covered! Drop us a line and let’s schedule a time to dive into the nitty-gritty together. Your business is our priority, and we’re here to support you every step of the way.
