Properly managing the finances of your business makes your business more likely to succeed, insight into your business can be provided through financial reports. Do you know how much money you’re making and how much money you’re spending each month? It’s vital to understand the financial reports of your business so that’s why we provide financial reports with monthly bookkeeping so you know where the money is going to and where the money is coming from so you can make better informed decisions for success. There are 3 major financial reports that every business owner should be looking at, we have listed them below.
Income Statement (or Profit and Loss report “P&L”):
This report shows a summary of revenue, costs, expense, and net income of a business over a specific period of time. In other words, it shows how much money is being spent and how much money is being earned. The P&L shows what the profit of the business is. Reports can be customized to run for specific time periods depending on what kind of information you are looking for.
Statement of Financial Position (or Balance Sheet):
The Balance Sheet shows assets, liabilities, and equity in the business. It’s the equivalent of the financial statement form and it’s also referred to as the statement of financial position. Assets are items that the business owns (capital) such as checking accounts, inventory, and land. Liabilities are things that the business owes like an auto loan, mortgage loan, and credit card balance. Lastly, equity is the investment that you have in the company like contributed capital and retained earnings.
Statement of Cash Flows:
The Statement of Cash Flows shows how the cash came into your business and where it went to. This report measurers the changes in accounts receivable, accounts payable, depreciation, amortization, inventory, most other assets and liabilities, prepaid expenses, unearned revenue, credit card liabilities, and payroll and sales tax liabilities.
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