Why Your Business Depends On These 4 Accounting Reports!
Whether you are about to set up your Dream Business or you are currently a Small Business Owner, there are some essentials functions that you must know in order to keep your business running. The most neglected of these essentials functions is by far Accounting. Believe us when we say this, NOBODY WANTS TO DO ACCOUNTING! No business owner cares about how accounting reports will be managed when they first start their business, and 90% of the time, they still don’t care about it even when their business starts to flourish. And why should they? They have a personal CA or an In-house accounting team that does it all for them! Right there! Now that’s where the problem arises. By refusing to understand and by turning a blind eye to these 4 Primary Accounting Reports, you are depriving your business of growth, improvement and expansion.
Income Statement / Profit And Loss Statement:
This is by far the most important statement that is a make or breaks for your business. Understand this, a Profit and Loss sheet tells you exactly how much money you spent on your business and how much money you earned in total. Most business owners just look at this sheet at the end of the year and don’t care much about it so long as they are making a profit. But without a thorough understanding of this statement, your business is making a loss, even if you are profiting.
Take some time out of your schedule to look at which product/service of yours makes you the most money and where you can curb needless spending. Get to know what’s working out for you and what isn’t and make sure that you are spending the most time on things that make you the most money. This analysis is so important that at Savage and Palmer, we offer our clients monthly MIS reports, giving them key insights in a visual and graphical format about their company so that they can take better informed strategic business decisions.
At a certain period of time, what your company owns and what your company owes is something that is given in detail in your balance sheet. All of your short term assets eg: Cash, should be in line with your short term liabilities eg: Taxes, so that at the end of the day, you have money to spend in order to grow your business. Business owners should keep an eye on this sheet because it tells you if you are taking too many loans, without actually having the money to pay them off in time.
A balance sheet makes you aware of your real financial position in the market without any sugar coating. This is extremely important because business owners live in a bubble and receive a heart attack when they realize the amount of money they owe people and organizations.
Accounts Receivable Aging Report:
Let’s look at a certain scenario where you have everything setup in your business with all of it functioning smoothly. You are offering and doing everything from your end, but at the end of the day, after all your efforts, your customers aren’t paying you! This becomes a huge problem for your business and it is very important to track this down via an Accounts Receivable Aging Report. You, as a business owner, must take charge and classify your customers according to those that always pay late, those who pay on time and those who have recently started slacking on payments.
Analyze the type of customers that regularly pay late and stop working with them effective immediately because they are holding you and your business down. This type of information will not be given by your In-House team until the end of the year or will usually be given to you incorrectly. Thus, this information will have to be fleshed out by you personally. We at Savage and Palmer understand the true importance of this report and make sure to regularly update our clients about their debtors, thus, saving them the time and trouble of verifying it and doing it themselves.
Accounts Payable Aging Report:
You know how it feels to not be paid! Don’t make your vendors go through the same experience and pay them on time! This report makes you aware of the people that you haven’t paid yet. It also makes you aware of the fact that your accounting team probably isn’t as good as you thought they were. While you recover from that setback, this may also be a sign that you should pay more attention than you do on this particular report.
Although the traditional mentality is to withhold vendor payments for as long as possible, if payments are not made in time, you will spoil relationships that potentially benefit your business as well as create a bad reputation for yourself in the market. This may lead up to a point where no one would want to work with you. Yes, it’s that serious! Our clients at Savage and Palmer, on the other hand, do not have to worry about this because we always make sure that we manage all their vendor payrolls to the ‘T’, thus, saving their time and their reputation.
All of these 4 reports are very important with respect to the overall business operations of your company. By paying attention to them, you are making sure that nothing comes between you and the growth of your business. Always remember that the development of your company is in your hands and by focusing on these essential accounting functions, you are creating a strong foundation for future progress and evolution. It is common knowledge that accounting reports can be boring and confusing. But at the end of the day, you will have to keep an eye on these reports, if you care about the future of your business. Or, you can hire the best to do this for you.