Even if you don’t manage your own accounting as a small business owner, it’s important to review and understand the most basic reports showing the financial health of your business. We outline financial reports all small business owners should be aware of below.
Accounts Receivable and Accounts Payable Aging
One of the most important aspects of small business accounting is keeping track of customers that owe money and how much they owe. It’s important to look for patterns such as who usually pays on time or early, who usually pays late, and who has just started struggling with making timely payments. Taking a proactive approach to late-paying customers can stop it from becoming a habit. However, you may need to deny credit to customers who perpetually pay late or impose hefty late fees to get their attention.
At the same time, make sure to pay your own company’s outstanding invoices on time. Not only will this improve your reputation in the business community, it will also give you access to early pay discounts and other privileges businesses reserve for the best customers.
The purpose of the balance sheet is to provide a quick glance of what your business owns and owes at any specific time. Common assets for small businesses typically include checking and savings accounts, accounts receivable invoices, and potentially one or more investment accounts. Computers and other office equipment, property, and other assets you could sell if necessary may also appear on your balance sheet. The liabilities column should include business loan and credit card payments as well as any other monies your business owes.
Profit and Loss Statement
Also known as the income statement, your company’s profit and loss statement shows you how much money your company makes after expenses along with several other pieces of crucial data. As a small business owner, you should always know where your revenue comes from and where your money goes to cover expenses.
The above are just a small sample of accounting reports you need to understand. We invite you to schedule an appointment with Norris Commercial Capital to learn more.