12 Finance Reports To Help You Make Better Business Decisions

I’m a great marketer, but I’m not great with details and numbers. However, I’ve forced myself to learn, take classes, read, and check out YouTube videos to be more financially literate. As an entrepreneur, you may feel like you have to wear many hats to run a successful business. From marketing to sales to customer service, the responsibilities can quickly pile up. Despite this, one crucial area that every business owner should have knowledge about is their finances. Being financially literate can make all the difference in the long-term success of your business.

In this article, we’ll discuss key financial reports you need to understand.

Reviewing and understanding these reports will help you make wise decisions in your business.

Profit Margin

Your profit margin is a measure of how much profit you make on each sale. By understanding your profit margin, you can make informed decisions about pricing and spending. For example, if your profit margin is low, you may need to cut costs or raise prices to become profitable.

By selling too cheap, you’re not able to make a profit to run your business or provide the lifestyle you and your family deserve.

Seth Godin writes

If you build your business around being the lowest-cost provider, that’s all you’ve got. Everything you do has to be a race in that direction, because if you veer toward anything else (service, workforce, impact, design, etc.) then a competitor with a more single-minded focus will sell your commodity cheaper than you.

Cheapest price is the refuge for the marketer with no ideas left or no guts to implement the ideas she has.

Everyone needs to sell at a fair price. But unless you’ve found a commodity that must remain a commodity, a fair price is not always the lowest price. Not when you understand that price is just one of the many tools available.

A short version of this riff: The low-price leader really doesn’t need someone with your skills.

Cash Flow Statement

The cash flow statement is an important financial report to regularly review because it provides a snapshot of the inflow and outflow of cash in your business. From this document, you can see how much money is coming in from sales, investments, and other sources, as well as how much money is going out to cover expenses. This document helps you make informed decisions about spending, investing, and planning for growth.

Profit & Loss Statement

A profit and loss statement (P&L) is another essential financial report that provides insight into how much money your business is making or losing. This document contains revenue and expense information that can help you set prices, determine profitability goals, identify areas for cost-cutting, and plan investment strategies.

Balance Sheet

The balance sheet provides a detailed breakdown of the assets, liabilities, and equity of your business at any given moment. Knowing this information allows you to make informed decisions about taking on debt or investing in new assets. It also helps you to manage risk by tracking the value of various assets over time and understanding the financial obligations of your company.

Accounts Receivable Aging Report

An accounts receivable aging report tracks all unpaid customer invoices and shows the amount overdue on each invoice based on its age. This document can be used to assess which customers are paying on time or late so that you can take appropriate action when necessary, such as sending collection notices or offering discounts for early payment.

Budget Comparison Report

A budget comparison report compares actual performance against budgeted performance across various financial metrics such as net income, sales volume, overhead costs etc., so that variances between budgeted amounts and actual amounts can be identified quickly. Taking this step will help you understand if there are any issues with spending or unaccounted-for costs so that corrections can be made before they become too costly or damaging to your business’s bottom line.

Financial Ratios Report

A financial ratios report calculates various ratios such as leverage ratio (debt-to-equity), current ratio (current assets to current liabilities), etc., which provide valuable insights into the liquidity position and efficiency/productivity of your business operations, respectively. Keeping track of these metrics will help you anticipate potential problems before they become serious issues for your company’s financial health down the line.

Cash Flow Forecast

A cash flow forecast predicts future cash flows by factoring in expected inflows from sales/investments/loans, etc., as well as expected outflows from expenses/debts/payments, etc., so that potential shortfalls can be identified ahead of time, allowing corrective action to be taken if necessary. Having an accurate cash flow forecast will help ensure that adequate resources are available when needed so that operations remain uninterrupted during lean times when income may not be sufficient enough to cover expenses fully..

Tax Planning Report

As tax laws differ between countries and states, a tax planning report provides a detailed overview of local regulations related to taxes, along with tax deductions available for certain categories of businesses, helping entrepreneurs plan their taxation strategy accordingly. Understanding both state-specific regulations as well as deductions available for businesses allows entrepreneurs to prepare their taxes more accurately while ensuring they don’t miss out on any benefits available due to ignorance.

Accounts Payable Aging Report

Similar to accounts receivable aging reports, accounts payable aging reports list unpaid supplier invoices according to their age. By regularly reviewing this document, businesses can ensure timely payments are made while avoiding late payments, which could lead to penalties or a negative reputation among vendors in the future.

Funds Availability Report

Lastly, funds availability reports show fund movement within bank accounts, which allows businesses to gain visibility into upcoming payments due from customers, which could then be used toward paying vendor invoices, thus ensuring smooth operations without any interruptions due to scarcity of funds.

How To Work with Your Accountant

Having a good relationship with your accountant is essential for the success of any business. Your accountant can provide valuable advice on financial matters, from setting up bookkeeping systems to filing taxes and more. Not only that, but they can also help you make informed decisions about investments and other long-term strategies that will secure your financial future. Working closely with an experienced accountant can give you peace of mind, knowing that all aspects of your finances are managed professionally and correctly. The right accountant can be an invaluable asset to any business owner, so it’s important to take the time to find one who understands your needs and goals.

How to Work with Your Bookkeeper

A bookkeeper plays an essential role in any business, as they are responsible for keeping accurate records of all financial transactions and ensuring that the books are balanced. Having a reliable and experienced bookkeeper on board can save you time, money, and stress by taking away the burden of managing your finances. Working closely with your bookkeeper is key to maintaining accurate records and staying up-to-date on changes in regulations or tax laws that could affect your business. Bookkeepers also provide invaluable insights into cash flow management, budgeting strategies, cost savings opportunities, and more – making them an indispensable resource for any successful company.

Continued Learning and Education

Now that you understand some of the basics of financial literacy, it’s important to keep learning and staying informed. Consider taking online courses, reading books or articles, or consulting with financial professionals to expand your knowledge. The more you educate yourself, the more confident and successful you’ll be in managing your finances.

Being financially literate is essential for the long-term success of your business. It’s crucial to understand your cash flow, balance sheet, profit and loss, and profit margin to make informed decisions about spending, investing, and pricing. By continuing to learn and expand your knowledge, you’ll become more confident in managing your money and achieving your business goals. Don’t hesitate to consult with professionals when needed, and remember that financial literacy is a journey that takes time and effort.

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