One of the most fundamental and essential elements of every business is the accounting function. As business executive, Tilman J. Fertitta stated, “Don’t ever let your business get ahead of the financial side of your business. Accounting, accounting, accounting. Know your numbers.”
Why Do You Need Accounting Reports?
Accounting reports are various statements that present the financial condition of a business. They are used for:
- Budgeting and planning. No business has unlimited resources, so it is important to have accurate records that help guide a company toward reaching its goals.
- Measuring business performance. Accounting reports aid a company in assessing the efficiency of its business processes.
- Decision making.
- Determining a company’s financial position including its liquidity.
- Establishing financial controls.
- Meeting legal requirements including taxes.
What Are the Most Important Accounting Reports for Your Business?
These important accounting reports provide business leaders with critical information about the health and growth of their business:
- Income (or P&L) statement. This “bottom line” statement is the most important one because it reflects the success of a business regarding the revenues generated, costs incurred in creating those revenues, and the profits or losses that result.
- Balance sheet. This statement summarizes the assets of a business, its liabilities, and the value of the company’s equity.
- Cash flow statement. This statement provides a picture showing how funds are flowing into and out of a business. A focus on cash flow enables a business to pay its bills and take action to expand the enterprise.
- Net profit margin over time. This report can help business owners manage pricing, expenses, and sales over time
- Revenue by customer. This enables a company to work effectively with its best customers.
- Accounts receivable aging. This report helps a company get the revenues it deserves on time.
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