Essential Financial Reports to Manage your Business

One of the most critical financial reports is the Profit & Loss Statement; it illustrates the sales, cost of sales and expense activity of your business over a period of time. Most accounting software programs like MYOB or Quickbooks have the option of being able to generate these reports over various periods of time dependent on your reporting needs. (monthly, quarterly, or yearly.)

Ideally you should get into the habit of running financial reports every month, usually after all of your sales invoices, purchase orders and expenses have been entered.

The Profit & Loss Statement identifies the following:

• What your sales activity was for the period.
• What your cost of sales were, (i.e. how much did it cost you to generate that sale?)
• What gross profit you made on those sales. (Sales - Cost of sales = Gross Profit)
• Expenses for the period such as selling, general and admin. Costs can be either fixed (rent), or variable (salaries)
• Net Profit - this represents the profit you have made in a particular period after you have subtracted all of your costs.

You may be thinking.....Does cash equal net income.....? NO!

Cash is not the same as net income as the balance sheet and profit & loss reports include both cash sales and sales made on credit.

A cash flow statement is also different to a cash flow forecast, which is used to predict the expected incoming and outgoing of cash flow over a future period. Generally the next 12 months.

Now, here are some of my tips to improve your cash flow.

The Balance Sheet is a financial report that provides a snapshot of your business' value at a specific point in time. It also shows how your business is being funded and how you are using those funds.

• How solvent the business is.
• How liquid the assets are. (How quickly can you turn those assets into cash)
• The value of your business at any given time.

OK, let's make this simple.

• Assets = How much you OWN
• Liabilities = How much you OWE
• Equity = Your NET WORTH