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The 5 Essential Financial Reports You Should Be Asking For in Your Business
A question I get asked frequently by my business owner clients is “What reports should I ask to keep my finger on the pulse of my business”.
Now this is slightly different depending on the business. For example, if you’re in a retail store, you’ll automatically have daily figures available as part of your normal processes. However, most businesses should ask for weekly, monthly and quarterly reports.
Why do I need to read the report!
Before I get into the detailed reporting, I know that many people don’t like looking at their business statistics. And usually it’s because they don’t know what they’re looking for. So usually their accountants or bookkeepers (or receptionists!) give them monthly reports, watch them hold their breath, and then either breathe a sigh of relief when they show a profit, or grumble and swear when they show a loss. . But usually by the time they get this report it is too late. Your business finances should be at the forefront of your mind every day—not something you look at once or twice a year when you run out of cash.
The first thing to do is to decide how often you need to view the report. I suggest at least monthly if not weekly. This can sometimes depend on whether you have a full-time account person or if they only come in once a month.
Top Tip: Complete a year every month
To help you stay on top of what’s going on in your business, one of the first things you should implement in your business is a month-to-month year-end culture. This means… you want to make sure that every income figure and expense is recorded for that month. If you insist on this type of culture, you will start getting accurate numbers. So think about each month at the end of the year and close all the financial data for each month. This way you know that your reports fully reflect the state of your business and you get an accurate profit and loss report and can help you identify trends in your cash flow.
Regarding reporting, if you have a full-time person overseeing your reports, you should meet with them weekly to review the reports. To make this process easier for you, check out the ‘Essential Financial Management Templates’ workbook which you can purchase from our website. This workbook contains a standard financial meeting agenda that will help you guide your meeting so that it is both effective and efficient.
When you are meeting with your account person, you want to make sure that you have all the reports in front of you – before your meeting – so that you have time to go over them and highlight any discrepancies that you need to address during the meeting.
Your weekly report pack
So what information do you need to know if your business is doing well? Your weekly report pack should include the following five reports (by the way, I also included a sample copy of each of these reports in the workbook I mentioned earlier):
1) Profit and Loss – This should be reported weekly (if you meet weekly) as well as month to date and year to date. That’s a total of three reports!
2) From there, you will request a copy of your old age dues. This report shows a list of all the people who owe you money and when it’s due – or if it’s overdue. If the amount is higher than your suppliers’ trading terms, you’ll want to know why. If it is due to cash flow, you should look at your cash flow analysis report to see when they will be paid. To maintain a good relationship with your supplier, you need to communicate with them afterwards.
3) Another required report is your seniority receipt. This is where you can clearly see who owns your money and if they owe you any money. This allows you to pursue a collection route before it becomes due. As part of your financial management system, you should have a standard follow up system. For example – what happens if a client exceeds their trading terms by 7 days – do you immediately follow up with a phone call to check they have received an invoice? If its 14 days – what happens – and so on.
If you refer to the ‘Essential Financial Management Templates’ workbook I mentioned earlier, there’s also a list of demand letters designed to help you when you need to get a little more serious about collecting. But again, Aged Receivables is essential because you need to see when your money comes in – so you can pay your suppliers and employees their wages without dipping into your own personal cash reserves.
4) This brings me to the next report – the cash flow analysis. This report should be put together by your bookkeeper and outline when money comes in and when it goes out. You can then see if there are any gaps so you can plan ahead to cover these. It could be that you need to transfer money from another account – or it could be that you’re chasing an overdue payment. What you don’t want is to find out when you go to transfer money that there’s nothing in the account!
Believe it or not, this is often the least used financial report – and yet the most important. You wouldn’t believe how many bookkeepers or accountants don’t do that. It’s not so much that it’s difficult to create, but it’s a working document which means it needs to be updated regularly. But keep it up, even if your accounts people try to put a small rebellion on it, because it’s a lifesaver for your business.
The ‘Essential Financial Management Templates’ workbook that I mentioned earlier found on our website contains a fantastic cash flow analysis report that will save you and your team a lot of time.
5) Other required reporting is bank reconciliation. If your bookkeeper is full-time, they can do this weekly using your bank’s online reports. If it is monthly, they have to wait for the bank statement from the bank before finalizing it. However, keep them on top of this – this report shows that the necessary procedures have been done to ensure that the month-end is closed and that the cash in the bank and any other payments or receipts are accounted for. Bank reconciliation is basically done to ensure that your amounts coming in and out of your bank account are accurately reflected in your accounting software package.
Working with your accountant
I would also recommend requesting that your financial controller automatically send a copy of your monthly reports to your accountant. That way your accountant can see where you’re going month-to-month. Depending on the size of your business, you can then set up regular meetings with your accountant – be it monthly or quarterly – to discuss those reports and your financial plans for the upcoming month.
As you receive these reports regularly, you will find that you have become more competent in your business and your finger is never far from the pulse!
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