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Do You Understand Business Financial Reports?

In order to effectively run a small business you need to know where your money is. Where does your money come from and where is it going? Financial reports can help you to understand the money issue but in many cases you may not understand what you are looking at. The business financial reports are pretty complex and they do not come with a users guide! Some small business owners have no idea what their bottom line looks like and they don't see how inventory ties into cash reserves and other areas. Other small business owners leave everything up to QuickBooks and assume that a computer program will be able to understand the reports and will tell them if there is a problem. When it comes to understanding your business financial reports you need to make sure you are properly reading them and that you know where your money is going. Checking your reports often will help you to know if the business is healthy or if there are warning signs that you need to rectify before they do get worse.

The profit and loss report is one of the easiest forms to use. Anyone that has a computer-based program like QuickBooks will be able to simply click on the report from the spreadsheet list and they can easily see where they are at. The profit and loss report will help you to see where your company is at and it is a wise idea to look at it monthly. This way you can see why you may have more money going out one month and more coming in the next month. Understanding how marketing and other things have a direct impact on the profit and loss statement will help you to focus more of your efforts to certain areas of the company. If something looks odd, check it out. It may be a data entry error and this error could really offset your books and cause you to have a lot of problems.

Every business owners goal is to have more money coming in than going out. Not only can you do this with sales but you can do this by cutting your expenses as well. Cutting back on unnecessary things will allow you to have an easier time saving money each month on your expenses so you are not wasting away money on unnecessary things. If you see that balance sheet is tipped more to the expense side than the income side, review it carefully and really get to the bottom of the problem. You need to find out what is going on and look for ways to fix it.

Now that you know what the profit and loss sheet is you can then focus on running quarterly reports to see where the company is. Your quarterly reports will help you to see what the company assets are and what your liabilities are. You need to ensure that the liabilities are matching the assets or this too could lead to problems.

Do you have a bookkeeper or financial controller? If you don't like to review reports, they can do this job for you and provide you with basic information and numbers to make decisions for the company. You need to consider hiring a bookkeeper to help you out and to be in charge of effectively managing the books to prevent your company from getting into a situation where things can get out of control. If you want a business that runs well and will be able to last for a long time, you have to take time to really review your books and to do all that you can to keep your expenses under control.

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