A small business owner may be so busy working in their business, they may not have the
amount of time to stop and work on their business. It's always tough seeing a business owner wrapped up in the day to day operations that they start to ignore goals and forecasts. Maybe from a bookkeeper here in Utah, financial reporting pointers can help both in the short term and long term. Diving into your small business's financial reporting can be time consuming if it's not utilized on the regular. Having a few reports that are saved under memorized transactions (usually in QuickBooks) that are easy to pull up can definitely reduce stress and save time if they are checked regularly. Focusing on Account's Receivable Reports, Labor vs. Revenue Compare, Profit Margins, and Account's Payable Reports will provide a decent amount of relevant data to be used going forward.
Accounts Receivable Report
Basically, this report shows the amount of money that is owed to the business for products or services that have been sold. To me, this report is one of the most important. The amounts shown in the AR Report should always be 100% accurate, and if they aren't then that means the accrual based reports are wrong. Not only are financial reports wrong, but analyzing cash flow is next to impossible since the data being used is inaccurate. Having a shorter AR life cycle results in a stronger cash flow understanding.
Labor Vs. Revenue Compare
Being able to adjust payroll based on predictable revenue patterns is a great way to limit major losses during slow periods or to make sure customers will still get the same service no matter how busy you are. Looking at non-manager payroll on a weekly basis vs. revenue is a strong tool that small businesses may not even know exists. This is where having a strong accounting mind bookkeeper comes in handy. Since payroll is one of the larger expenses for a business, it would be easy to have a lower profit if the payroll margins fluctuated unpredictably. This report is usually created in Excel and pulls data from many sources since it's unique to each business and owner. We have found that this report is a major component in the restaurant industry.
For us at Salt Lake City Bookkeeping, this report is a no brainer. It's important and easy to pull with a few clicks of a mouse. It's as simple as modifying the Profit & Loss Report to show percentage of income for each line item. Micro-managing these margins means the business is being run like a fine tuned machine and any change to these numbers is predicted and the impact is known prior to it happening. Slightly changing margins can result in increased cash flow and more money in the bank for future business plans such as increased inbound marketing, location expansion, production development, and the list goes on and on. This report should be looked at on a weekly basis, if not more.
Small businesses tend to ignore Accounts Payable until it's pointed out to them the impact it
has on the books. Not knowing how much money is owed to vendors is a painful mindset for me to understand. Having the proper AP system set up allows you to set terms with your vendors and manage cash flow that much more. Paying bills on an inconsistent basis isn't a healthy business practice. Not only is it taxing for the bookkeeper, it can really strain cash flow and other business decisions.
Most of these tips relate directly to cash flow impacts, which probably isn't a big surprise since cash flow is very important to any business, let alone a small business. Feel free to reach out to learn more how we can help your business today.