What are the most crucial financial reports for a business owner

The key to growing a business lies in knowing where your business is at right now, arming yourself with insight into what’s driving the numbers you see, and then finding ways to nudge them in the right direction. But blindly reading through a bunch of financial reports every week can be time-consuming. Hence you must prioritize your time and give more time to the most crucial of financial reports. Here we have made a list of some of the most important financial reports that you should give special attention to as the owner or the financial analyst of a small business

Balance Sheet

Your balance sheet is a snapshot of your business’s financial position at a given point in time. It lists all of your business’s assets, liabilities and owner equity (the value of the business) at a specific date (e.g end of the financial year).

Assets are things that add value to your business, such as equipment, stock, cash and debts owed to you (your debtors). Liabilities are things that lower the value of your business, such as loans and debts you owe (your creditors). You will be able to collect important information to proceed with your goals, like reviewing your business credit report for a possible expansion loan. Net assets equal the difference between your assets and liabilities.

To prepare a balance sheet for your business, you will need to know the value of all current assets and liabilities. You can use an accounting software program to track this information in real-time. This will ensure that to manage the details of your account 3 golden rules of accounting were adhered to. You can visit Khatabook to understand these rules.

By comparing your balance sheet from one period to another, you can see if there has been an increase or decrease in assets and liabilities, which will give you an indication as to whether or not you’re managing your cash flow effectively. If you’re working with an accountant or bookkeeper, they should be providing this to you regularly so it can be reviewed alongside other

Cash flow statement

The cash flow statement is an essential report you need to review to understand the financial health of your business. It shows where money is going, how much financial activity has taken place and how much cash was involved. The cash flow statement will help you answer the question of whether your business has enough cash on hand, or if it needs more – or less – to operate successfully.

Profit and loss statement

Also known as an income statement, a profit and loss account shows your revenue, expenses, interest and tax for a specific period. This report allows you to see what’s going in and out of your business and whether you’re making a profit at the end of the day. A profit and loss statement can be produced monthly, quarterly or annually, depending on which timeframe works best for you.

Statement of retained earnings

Your statement of retained earnings provides a record of all changes in owner’s equity over time and details the amount available for reinvestment in the business or distribution to shareholders. 

The statement of retained earnings provides important information about your business’s financial standing, including:

• Changes in retained earnings over time
• Your business’ net income for the period
• Dividends that were paid in a fixed duration of time.
• The balance between cash inflow and outflow from your business