Why Financial Reporting is Something You Should Do For Your Home Business

financial reportingNew York Times quoted Mr. Cloutier in 2010, author of “Profits Aren’t Everything, They’re the Only Thing”. He said that most troubled companies haven’t implemented strong financial reporting. Small businesses fail to focus on the basics of profit and loss statements and cash flow.

Mr. Cloutier has an extensive control system as founder and chief executive of American Management Services. He can tell you how many sales have been made each day, what the bank balances are each morning and how much line of credit has been used. He’s been accused of being a control freak but prefers to say, “I have a very strong view that you should be carefully monitoring — and intervene early rather than late when you see something going off track.”

Only you know if you have a handle on this aspect of your business. Review these points below to determine your grasp on your home business financial reporting.

Consistent Template Reports

You can’t see inconsistencies or errors if your reports change even a little every time you produce them. Don’t produce them on different programs by jumping from word to excel.

Try to keep the line items the same and refrain from adding or deleting line items. If you are using a software program, always use it and learn to use the reports in it properly.

Your reports need consistency to see changes and identify numbers between different styles of reports. Don’t call your employee line item labor on one report and manpower on another. Don’t combine employee and outsourced work on one report and then separate them on another.

You shouldn’t feel like you need to use a reference card to know what each item is. Keeping it uniform between them will help you learn and see changes over time. You don’t have to be a professional accountant or even have a college education to succeed in understanding your business’s reports.

Scheduled Reporting

Set up a timetable that you consistently produce your reports. This shouldn’t be optional. Reoccurring appointments in your calendar will be the most helpful.

Monthly and quarterly reports are a given. Depending on your business, it may be helpful to have internal, cash flow specific reports created and reviewed on a more weekly schedule. These financial reporting documents may only be for your internal reviews.

Banks, investors and other lending institutions will be interested in your quarterly and yearly statements. They may ask for calendar year or year-end statements. It just depends on what they will be using them for.

You may outsource monitoring of certain aspects of your business to outside companies, like Rev-Ignition. They may have specialized reports they require you put together. Your investors may want to see specific reports regularly to track their investment over time too.

Scheduled Reviewing

Producing your balance sheet, income statement and cash flow reports regularly is a wonderful thing. But having the reports and not reviewing them is like making dinner but never eating. To make your company bigger and stronger, you have to review your companies growth and make changes.

Start by knowing your operating margins, debt to equity ratios and working capital for your business. Understanding how to pull these three key ratios from your financial reporting will be a great start to monitoring your business health over time.

You want to know that your business is growing and your price points are competitive long-term in the market. After that, you will be able to really drill down into your books.

Discover which of your customers are spending the most money, on what and when. It may not be exciting but reporting really is the lifeblood of your small business.

More Financial Reporting Information

Keep reading on our website for more great how-to information on business and money.

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