For any business, maintaining accurate financial reports is important. Financial reports are a formal record of the financial activities and position of the business. It provides valuable information for creditors, investors and business analysts to evaluate the company’s performance. Financial reports of a company are compiled on a daily basis and these help keep track of the inflow and outflow of cash and facilitate better decision-making regarding the company’s financing and expansion. A company report includes daily transactions, earnings estimates, cash receivable, cash disbursement etc. Entry of all this data is time-consuming and tedious but necessary, and outsourcing to a reliable data entry service would ensure accurate entry of this data.
Financial reports provide business owners a valuable overview of the growth and development of their business. That is why it is vital that they review these reports periodically along with an accounting expert who may be able to offer advice on improving financials.
The following are the five crucial financial reports any business should review.
- Profit and Loss: The profit and loss statement shows how much profit or loss a business has generated during a specific period i.e. subtracting operating expenses from overall revenue. Ina profit and loss statement, the upper part shows various sources of operating income like revenue from wholesale and retail sales, and rental or interest income. The lower part of the income statement includes various categories of expenditure such as materials, labour, rent and depreciation. A profit or loss statement helps to know whether your business is earning or losing.
- Balance Sheet: The balance sheet of a company show sits financial health. It has two parts: assets and liabilities. Assets include all items that businesses own like cashin hand, money in the bank etc and liabilities includes all items that the business owes such as outstanding loans, unpaid bills, unpaid payrolls etc.
- Cash flow statements: These include data from both income statement and balance sheet that shows how cash goes in and out of the business. This statement helps business owners to anticipate and plan for potential revenue shortfalls by conserving resources; monitoring cash flow regularly helps to give a better perspective on the business’ financial status. The cash flow statement includes categories of anticipated expenditure such as payroll, rent and loan payments and a section of anticipated revenue like sales from wholesale and retail operations, and capital infusion from loans. Comparing these two categories helps to determine whether you have sufficient operating capital.
- Net profit margin over time: It tracks net profit margin over many quarters that helps business owners to manage pricing, expenses and sales efforts. It shows the profit with every dollar of sales. It helps to compare a business’s margin with industry peers.
- Accounts payable days and accounts receivable days: Accounts receivable days refer to the number of days until a company gets paid for its goods or services. It helps to monitor whether the receivables are piling up faster than the company’s ability to collect. Accounts payable days help to identify how long the business takes to pay suppliers. It has a major impact on the company’s cash situation.
The financial reports of a company provide valuable information regarding its monetary status. It helps to evaluate how much money the company makes, how much they need, their reserves and how they propose to increase their sales and financial status. Financial report data entry and management can be streamlined and made more efficient with a reliable data entry company. Periodic review of these reports will confirm that your business is functioning smoothly and you can expect steady business growth. Most importantly, comprehensive reviews will help you spot existing challenges that must be immediately addressed for successful business operation.