Cash Generated From Collection Of Accounts Receivalbles Cash Flow Statement The 5 Essential Financial Reports You Should Be Asking For in Your Business

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The 5 Essential Financial Reports You Should Be Asking For in Your Business

A question I am often asked by business owner clients is “what reports should I request to monitor the pulse of my business”.

Now this varies slightly from company to company. For example, if you are a retail store, daily data will automatically be available to you as part of your normal process. However, most companies should require weekly, monthly and quarterly reports.

WHY SHOULD I READ THE REPORTS!

Before I go through the reports in detail, I know a lot of people don’t like looking at the numbers in their business. And usually it’s because they don’t know what it is they’re looking for. Usually then their accountant or bookkeeper (or receptionist!) gives them a monthly report, they look at it with bated breath, then sigh when it shows a profit, or frown and curse when it shows a loss. But by the time they get that report, it’s usually too late. The financial health of your business 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.

FREQUENCY OF REPORTS

The first thing you need to decide is how often you need to view the reports. I suggest at least monthly if not weekly. This can sometimes depend on whether you have a full-time accounts person or if they only come in once a month.

BEST TIP: END THE YEAR EVERY MONTH

To help you know what’s going on in your business, one of the first things you need to instill in your business is a culture of closing the year every month. What I mean by this is… you want to make sure that all income and expense data is recorded according to the month in which it was incurred. If you stick with this type of culture, you will start getting accurate numbers. So think about the end of the year every month and complete all the financial data for each month. This way, you know that your reports fully reflect the state of your business and you get accurate profit and loss reporting that can help you identify trends in your cash flow.

Regarding reporting: If you have a person who takes care of your reports, you should have a weekly meeting with them to go over the reports. To help you with this process, take a look at the ‘Essential Tips for Financial Management’ workbook which can be purchased from our website. This workbook has a standard financial meeting agenda to help you run the meeting so that it is effective and efficient.

When you meet with your accounts person, you should make sure that you have all the reports in advance – before the meeting – so that you have time to review them and highlight any discrepancies that you can then address during the meeting.

YOUR WEEKLY REPORT PACKAGE

So what information do you need to know if your business is doing well or not? Well, your weekly report package should consist of the following five reports (by the way, a sample copy of each of these reports is also included in the workbook I mentioned earlier):

1) Profit and loss – this should be submitted weekly (if you meet weekly) as well as a month to date and year to date report. So that’s a total of three reports!

2) From there you would request a copy of your old obligations. This report shows a list of all the people you owe money to and when it’s due – or if it’s due. If any amounts exceed your supplier’s trading terms, you want to know why. If it is due to cash flow, then look at the cash flow analysis report to see when they will be paid. If you want to maintain a good relationship with your supplier, you need to communicate this with them.

3) Another important report is your past due accounts receivable. Here you can clearly see who owes you money and whether they have any outstanding amounts owed to you. This allows you to track collections before they are due. You should have a standard tracking system as part of your financial management systems. For example – if a customer has exceeded their trading terms by 7 days, what happens – or follow up with a quick phone call to check they have received an invoice. If it is 14 days – what happens – and so on.

If you refer to the ‘Essential Suggestions for Financial Management’ workbook I mentioned earlier, there is also a list of request letters to help you when you need to get a little more serious about collecting. But again, bad debt is essential because you need to see when your money is coming in — so you can pay your suppliers and employees their wages without having to dip into your personal cash reserves.

4) This brings me to the next report – the cash flow analysis. This report should be drawn up by your bookkeeper and indicates when money is coming in and when it is going out. You can then see if there are any shortfalls so you can make plans ahead of time to cover it. You may need to transfer money from another account – or chase outstanding payments. But you don’t want to find out when you transfer money that there is nothing in your account!

Believe it or not, this is often the most underutilized financial report – yet the most important. You wouldn’t believe how many bookkeeping or accounts people don’t even do. It’s not so much that it’s difficult to produce, but it’s a working document, which means it needs to be updated regularly. But stick with it, even if your accounts people try to push back a little because it’s a solution for your business.

The “Essential Tips for Financial Management” workbook I mentioned earlier, which is on our website, has a fantastic cash flow analysis report that will save you and your team a lot of time.

5) Another important report to have 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 will have to wait for the bank statement to arrive before they can complete. But please note this – this report shows that the necessary process has been carried out to ensure that the month end has been closed and that cash in the bank and any other payments or receipts have been accounted for. Essentially, bank reconciliation is 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 also recommend that you request that your financial controller automatically send a copy of your monthly reports to your accountant. This way your accountant can see where you are headed from month to month. Depending on the size of your business, you can then schedule regular meetings with your accountant—whether monthly or quarterly—to discuss these reports and your financial plans for the coming month.

When you receive these reports regularly, you will find that you are much more empowered in your business and your finger is never far from the pulse!

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