New (Financial) Year Resolutions!
As with the start of a new calendar year, the new financial year is a great time for making resolutions and setting goals for your business. These resolutions and goals can be a useful tool in creating focus and assisting in moving your business forward. In order to achieve your business goals, you will need to have a clear vision of where you would like your business to be, and in what time frame. Additional financial reporting will assist your business in achieving the goals you have set. Any business that is not creating and utilising regular financial reports will be unable to asses how well the business is performing and the areas where improvement can be made.
Cash flow reporting is important for ensuring that your business can meet its financial obligations. An up-to-date, regular cash flow report gives the business owner valuable information regarding how much money is owed and at what date versus how much money is expected in and on what date. This will enable the business owner to be proactive in managing the finances of the business and assist in preventing a 'cash flow crisis' from occurring. When attention is not paid to cash flow it can affect the relationship between your business and your suppliers. Monthly accounts paid late may result in your lines of credit being suspended or cancelled. In the worst case, it can mean that, ultimately, your business will fail.
Profit & Loss
The Profit & Loss report is the statement of financial performance of your business. This reports shows how much money has been made, ie profit, once the expenses have been deducted. Expenses are broken down into two sub-sections, cost of sales - being those expenses that are related to the provision of goods or services, and expenses - being the business overheads which are not directly related to the provision of goods and services. Profit & Loss reports can be created to show the overall financial performance of your business between specified dates, or the performance of a certain part of your business, for example and individual job.
The Balance Sheet shows a statement of the financial position of your business at a given date, and therefore what the business is worth. The Balance Sheet states the assets owned by the business, the liabilities owed by the business and the equity in the business. The equity is the amount of money remaining in the business after the liabilities have been deducted from the assets. Within the Assets and Liabilities are sub-sections, current assets and non-current assets, current liabilities and non-current liabilities. Understanding the Balance Sheet of your business will help you to understand your business.
Budgets can be created within your accounting software to enable you to track the expenditure of your business, or of a part of your business, for example a specific job. By using budget reports for jobs, you can gain a better understanding of how accurately a job has been quoted. In order to maintain profit on a specified job it is important to closely monitor the budget and work within the figures provided in the budget report. Areas that are identified as going over-budget can be improved upon in subsequent quotes.
Profit margins reports can be created to assist the business in selling jobs at a higher margin and therefore, increase the profit. These reports can also be used to assist in pin-pointing other areas of the business where savings can be made, which again will increase the profits.
How Love Bookkeeping Can Help
Love Bookkeeping can assist you in realising your business goals by ensuring that your accounting software is set up in the most efficient and effective way for your business and by creating valuable reporting packages. Any or all of the above reports can be incorporated into the service provided to your business by Love Bookkeeping.