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Accounting reports that you must know for your small business

When running your small business, you must know the key accounting reports to effectively organise and manage your finances. It is important for a business owner or business accountant to understand how each report affects your financial standing, and how the data can be used to help your business plan. We at M.A.S Partners, the leading small business accountant in Sydney Zetland, are experts in the field of accounting reports, and have provide a list of key reports that you must understand and know how to analyse in order to develop your small business.

Balance sheet
A balance sheet is the statement of your business’ financial position- which summarises all of your business assets and liabilities. This would include how much cash you have, and your current resources. Your assets subtracted by your liabilities adds up to your overall equity. Using previous year’s balance sheets, you are able to see a trend, and predict yearly growth. Doing so, you can also predict your yearly revenue, and estimate how much merchandise you should buy for the coming years. In addition, you have the ability to plan out how much you can borrow, to ensure your equity is positive at all times.

Profit and Loss Statement
Arguably the most important report for business growth, the profit and loss statement describes in specific detail how much money a business makes. In doing so, it includes where the money is spent, and where the income is from. This is called expenses and revenue, respectively. Often, without an effective profit and loss statement, owners can lose profit annually, due to miscalculating exactly how much they are spending. When analysing your profit and loss statement, you should always compare it to the same period in the prior year- accounting for seasonal changes. By doing so, you are able to analyse exactly how much you have grown in the year.

Cash flow statements
Cash flow statements show exactly how much cash is moving in and out of your business- and where it is being moved- which reflects the liquidity of the business. A highly liquid business would have a lot of cash- as cash is the most liquid asset- and shows the business’ ability to pay off debt. When running a small business, it is common to acquire a lot of liabilities- however a cash flow statement shows exactly how much debt you are able to take on.

Hire a small business accountant
With so many different accounting reports it can be difficult to learn how to write up and analyse them all. Consider hiring from M.A.S Partners, a small business accountant which handles all your finance analysing needs in the most efficient and effective manner. Although it is important for a business owner to understand how these reports work, a small business accountant helps them maximise their earnings, and prepare for the coming years. For more information on our services, click here.