Small businesses are required to prepare certain accounting reports for various reasons, one of the key reasons being tax purposes. However, accounting reports are also useful to small business owners as they can be used to expand and improve the business.
Whether you are preparing your own accounting reports or outsource accounting services, these are the most important accounting reports for your small business.
- Income Statement
An income statement, which is also referred to as a profit and loss statement, is an accounting report on the financial performance of a small business over a specific period of time and is one of the three key financial statements any business must prepare.
Bookkeeping services will focus on the revenues and expenses of the business when preparing the income statement, with total revenue and gains subtracted by total expenses and losses to calculate the company’s net income.
Monthly income statements are recommended for small businesses and a business advisor may use these accounting reports to gain insights on the efficiency of the company’s management, performance of different departments, as well as the performance of the small business in comparison to others in the industry.
- Balance Sheet
A balance sheet will provide the business owner with information on the company’s assets, liabilities, and shareholders’ equity during a specific period and, like profit and loss statements, this is an important financial statement any business should prepare.
This accounting report gives the business owner an idea of what the company owns and owes as well as how much has been invested by shareholders. While your business advisor may use the balance statement to calculate the financial ratios of your business, this accounting report for a small business will include assets like bank accounts, investment accounts, property, and equipment as well as liabilities like credit cards and business loans.
- Cash Flow Statement
This accounting report looks at the amount of cash entering and leaving your small business during a specific period of time and bookkeeping services will prepare your cash flow statement so you can understand how your business operations are running. The cash flow statement can also give investors an idea of your financial footing and this report is one of the three key financial statements for any business.
A cash flow statement will consider operating activities or the core activities of the small business that generates cash inflows and outflows, investing activities like the sale or purchase of property, and financing activities, which are cash level changes from the sale of equity securities and dividends to shareholders.
While cash flow statements are important, you may find yourself unable to prepare these accounting reports yourself and may not have the capacity to hire an accountant for your small business. In such a situation, you can outsource your financial reporting to reputable accounting firms in London which will give you access to bookkeeping services as well as additional services like a business advisor or tax consultancy.
- Accounts Receivable Aging
An aged receivables report will categorise your company’s accounts receivable according to the length of time that an invoice has been outstanding. This report can be used by a business advisor to determine the financial health of your customers. While accounting services by accounting firms in London can prepare this accounting report for you, it is a great way to identify customers who always pay late or have recently begun paying late.
- Revenue By Customer
While accounts receivable aging gives you an idea of the customers that owe you money, the revenue by customer report will tell you how much you are earning from customers during a specific period of time.
A business advisor may suggest using this accounting report to identify customers worth developing good relationships with so that they can be converted into a reliable and health income stream for your small business.
It is, however, important that you do not rely too much on one source of income as this increases your revenue concentration risk.
- Accounts Payable Aging
Just as you are using bookkeeping services or accounting firms in London to identify customers who delay payments due to you, your customers are also doing the same. Accounts payable aging looks at the customers you owe and how much you owe them and not delaying payments will help you maintain good relationships with your customers.
