A question I often get asked from my business owner clients is “what reports should I be asking for so that I can keep my finger on the pulse on my business”.
Now this does differ slightly from business to business. For example, if you are a retail shop, then you’re going to automatically have daily figures obtainable to you as part of your normal course of action. However most businesses should be asking for weekly, monthly and quarterly reports.
WHY I NEED TO READ REPORTS!
Before I go by the reports in detail, I know that a lot of people don’t like looking at the figures in their business. And usually this is because they don’t know what it is that they’re looking for. So usually then their accountant or bookkeeper (or receptionist!) gives them a monthly report, they to peek briefly at while holding their breath, and then either breathe a sigh of relief if it shows a profit, or they grimace and swear when it shows a loss. But usually by the time they’ve got this report, it’s already too late. The financial position of your business should be at the spotlight of your mind every day- not something that you look at once or twice a year when you run out of cash.
The first thing to decide is how frequently you need to see reports. I suggest a minimum of monthly, if not weekly. This can sometimes depend on whether you have a complete time accounts person, or whether they only come in once a month.
TOP TIP: DO A YEAR END EACH MONTH
To help you know what’s going on in your business, one of the first things to implement into your business is a culture of having a year end every month. By that I average… you want to ensure that every revenue figure and expense if recorded according to the month that it’s incurred. If you insist on this kind of culture, you will start to receive accurate figures. So think end of year each month and close off all financial data for each month. That way you know that your reports fully mirror the state of your business and you get accurate profit and loss reporting and it can help you to clarify trends in your cash flow.
With regards to reporting, if you have a complete time person looking after your reports, you should be having a weekly meeting with them to review reports. To make this course of action easy for you, refer to the ‘basic Financial Management Templates’ workbook which you can buy from our website. This workbook has a standard financial meeting agenda that will help you to guide your meeting so that it’s both effective and efficient.
When you are meeting with your accounts person, you want to ensure that you have all the reports up front -before your meeting – so that you have time to go by them and highlight any discrepancies that you can then address during the meeting.
YOUR WEEKLY REPORT PACK
So what information do you need to know if your business is doing well or not? Well your weekly report pack should be make up of consistently the following five reports (by the way, a sample copy of each of these reports is also included in the workbook that I mentioned before):
1) A Profit and Loss – this should be provided weekly (if you’re meeting weekly) in addition as a Month to Date and a Year to Date report. So that’s truly three reports in total!
2) From there, you would request a copy of your Aged Payables. This report shows a list of all the people that you owe money to, and when it’s due – or if its overdue. If there are any amounts that go beyond your suppliers trading terms, you want to know why. If it’s because of cash flow, you then look at your cash flow examination report to see when they will be paid. To continue a great relationship with your supplier, you then need to communicate this with them.
3) Another basic report is your Aged Receivables. This is where you can clearly see who owes you money and if they have any amounts noticeable to you. This allows you to follow up on collections way before it becomes overdue. As part of your financial management systems, you should have a standard follow up system. For example – if a client has surpassed their trading terms by 7 days, what happens – do you follow up with a quick phone call to check that they’ve received the invoice. If its 14 days – what happens – and so on.
If you refer to the ‘basic Financial Management Templates’ workbook that I mentioned before, there’s also a list of need letters designed to help you when you need to be a little more serious about collecting. But once again, Aged Receivables is basic because you need to see when your money is coming in – so that you can pay your suppliers and employees their wages without having to dip into your own personal cash reserves.
4) This brings me to the next report – a Cash flow examination. This report should be put together by your bookkeeper and outlines when money is coming in and when it is going out. You can then see if there are any shortfalls so that you can make plans in improvement to get this covered. It may be that you need to move monies from another account – or it may be that you chase noticeable payments. What you don’t want is to find out when you go to move the money is that there’s nothing in the account!
Believe it or not, this is often the most under-utilized financial report – and in addition it’s the most important. You wouldn’t believe how many bookkeepers or accounts people don’t do them either. It’s not so much that it’s difficult to produce, but it’s a working document which method that it needs to be regularly updated. But persist with this one, already if your accounts people try a mini revolt over it, because it’s a life saver for your business.
The ‘basic Financial Management Templates’ workbook that I referred to before that’s found on our website contains a fantastic cash flow examination report that will save you and your team a lot of time.
5) The other basic report to have is the Bank Reconciliation. If your bookkeeper is complete time, then they can do this weekly by using the online reports from your bank. If its monthly, then they will need to wait for the bank statement to arrive from the bank before they can finalise. However, keep on top of them for this – this report shows that the necessary course of action has been done to ensure that the month end has been closed off and that the cash in bank and any other payments or receipts are accounted for. Basically a bank reconciliation is done so that its guaranteed that your amounts coming into and out of your bank account are precisely reflected in your accounting software package.
WORKING WITH YOUR ACCOUNTANT
I would also recommend requesting that your financial controller automatically sends a copy of your monthly reports to your accountant. This way your accountant can see where you’re headed from month to month. Depending on the size of your business, you could then establish regular meetings with your accountant – whether it’s monthly or quarterly – to discuss those reports and your financial plans for the coming month.
Once you are receiving these reports regularly, you will find that you become much more empowered in your business and your finger is never far from the pulse!