Most entrepreneurs are aware of the importance of keeping up with small business accounting at tax time. However, diligent accounting also has numerous other benefits, such as enabling you to assess the efficacy of your products and services, and increasing your revenue by helping you focus on the most lucrative clients.
Here are some crucial accounting reports to consider when evaluating various aspects of your business.
Study your balance sheets to obtain an overview of your company’s assets and liabilities. Assets include bank accounts, invoices, real estate, equipment, and other property. Liabilities are loans, credit cards, and other debts. You subtract liabilities from assets to determine your company equity.
Profit and Loss Statements
Your business’s profit and loss statements tell you the amount of income you earn from various sources as well as your expenses broken down into categories. Periodically review your profit and loss statement to assess the most profitable aspects of your business and make appropriate adjustments.
Accounts Receivable Aging Reports
Accounts receivable aging reports let you know whether customers are paying their bills on time. This allows you to evaluate the efficiency of your collections. Watch out for trends here such as habitually late-paying clients.
Accounts Payable Aging Reports
These reports tell you whether your company is paying its bills promptly. Your goal should be to extend the same courtesy of on-time payments to your vendors as you expect from your clients. Early payments to vendors may get you a discount, while late payments may provoke financial penalties and a drop in your business credit score.
Revenue by Customer Reports
Revenue by Customer Reports are an indication of which of your clients provide you with the most income. This allows you to concentrate your attention on quality clients. However, be sure to diversify your income sources so that the loss of any one customer would not be a significant blow to your business.
For more advice on business accounting, get in touch with BizCap Commercial Finance.