Many business owners are being intimidated and choose to hide from their accounts. But it is wise as accounting reports add value and intelligence to business. Here are the important accounting reports, including profit and loss statement, customer revenue, and more.
Whether you're doing your own bookkeeping or having a whole accounts team, whether your business is big or small, there are few accounting reports that all business people need to know about like the back of their hands.
Income Statement(Profit & Loss Statement)
The income statement, also known as the profit and loss statement, or P&L, shows your revenue, costs, and expenses during any given period of time. Income Statement provides the best view of your income or net revenue and that is the reason why it usually shows corporate loans and investors if you have made or lost money over a certain period.
The net income of your business is also the basis for determining your taxable income annually. This is calculated by removing the expenses of your company from its total income, which you can find in your income statement.
Balance Sheet
A balance sheet gives you a snapshot of what a business has and owes at any given time. It contains the lists of its assets (what the company owns), its liabilities (what it owes) and the difference between those two, i.e. the company’s equity. Some key items on the balance sheet include: cash, accounts receivable, inventory, accounts payable and (if you have debt) the portion of long-term debt that is due this year and the balance of any short-term loans (usually secured by accounts receivable and inventory).
Cash Flow Statement
Your cash flow statement shows each and every one of the incoming and outgoing transactions of your business. It shows how you spend your money and how you earn your income over a period of time. This accounting report combines information both from the income statement and the balance sheet to provide an overview of how cash flows in and flows out of a business. For a business owner, one of the most important lines across all accounting reports is the "cash flow from operations" line. It shows the net difference of cash coming in and cash going out on an operating level over the listed period.
Accounts receivable aging
An accounts receivable aging report lists unpaid customer invoices and unused credit notes by dates. The aging report is the primary tool used by collection staff to determine which payment invoices are overdue. The report may be configured to contain contact information for each customer due to its use as a collection tool. Management also uses the report to assess the efficacy of credit and collection functions. Through this report, you can look out for customers who are perpetually late, usually pay on time and recently started paying late, and growing late balances from any customer.
Accounts payable aging
An accounts payable aging report allows you to view the balances you owe to other companies for supplies, inventory and services your company receives. It shows out the due dates of the bills and invoices to pay by a company. The accounts payable aging report categorizes payable to suppliers based on time buckets. These buckets enable a business owner to recognize payments due for the current month, the next month, etc. in a timeless manner.
It can be eye-opening to immerse yourself in the accounts of your business. It is the best way to see how money actually flows in and out of your business and will be able to ask the right questions for yourself, your staff and your stakeholders. Understanding these accounting reports is an important step in making of a smart and more data-driven business owners.
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