Each month, your accounting system yields actionable information for you to run your business better. Here are some key reports that all business owners should review every month.
1. Balance Sheet
Reviewing the balance sheet can tell you balances of your current assets and current liabilities. Current assets should always be larger than current liabilities. If not, you may have liquidity issues. You can also take a look at these accounts: cash, accounts receivable, and accounts payable. They should look reasonable to you based on your business history.
2. Accounts Receivable Aging (A/R)
Your A/R Aging report can alert you to who has not paid their invoice so that you can take action to collect that money. Any balances over 30 days should trigger a collection process. The older the receivable gets, the less likely it is to be collected.
3. Accounts Payable Aging (A/P)
Hopefully, this report is clean and you are able to pay all of your bills on time. If you have a large amount in this account, you’ll want to make sure you have the future cash to pay the bills.
4. Income Statement
The first number most entrepreneurs look at on the income statement is profit. It’s a good idea to review every account balance on this report to see if it’s what you expected. Some questions to ask yourself include:
- Did I generate the amount of revenue that I expected? If not, should I boost marketing for the next few months?
- Do all of my expenses look reasonable? Are there any numbers that look too high?
- Are my payroll expenses in line with what I was expecting?
- Which accounts caused me to generate more or less profit?
- What I can I do next month to improve performance and increase profit?
5. Sales Reports
There are many excellent sales reports to dive deeper into your revenue so you can see what sold and what didn’t. These five reports are very basic, but they are also key to your business. To profit from these reports, it’s up to you to take action in your business to improve your success. Would you like these reports sent to you on a monthly basis? Reach out to your Favorite Orange County Bookkeeping service, Team One Accounting for help!