There are a lot of people who start a small business without comprehending that some of the background work is similar to that of a large business, particularly reporting. While small businesses usually lack shareholders and a board of directors, many of the reporting requirements are the same as if they did.
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Here are some of the essential reports for operating a small business, both regarding what needs to be passed onto the government and what will help the owner keep the business operational.
Cash Flow Report
Businesses are often hard at work trying to improve their cash flow. The better the cash flow, the more money that can be invested in expanding or improving the business. The cash flow is also a great way to track how money is coming into the business and where it’s going once it gets there. For example, a customer pays a large invoice, which is used to pay the overhead operational costs.
For a cash flow report to be efficient, your organization needs to have measures in place to improve the paper trail. Small businesses looking to optimize their cash flow report are in need of an invoice template, as well as a comprehensive budget tracking system.
Income Statement (P&L)
Your income statement– or “profit and loss” statement– gives you an easy-to-understand view of what’s happening in your business at any given time. Ultimately, it tells you if you’re operating in the red or the black, and helps you make decisions based on that outcome. You will also use this statement for tax purposes when year-end reporting rolls around. By having your P&L updated every month, you make it easier to get your taxes filed on time.
Income statements are often used to help sell your business or get loans from the bank to expand your operations. Depending on your business structure, you can choose to do this through cash accounting (recording money when it comes and goes) or accrual accounting (reporting the transaction when it happens regardless of payment dates).
Business Reporting
Balance Sheet
A balance sheet is the third component of a financial statement, and thus an equally important report. It can, however, be confusing to those who don’t have experience in accounting. Essentially, a balance sheet records your assets and liabilities. If you do this properly, the amount on both sides of the equation will match.
For this report, unless you have a strong foundation of accounting knowledge and some excellent reporting technology, you should consider hiring an accounting consultant to get you started.
Google Analytics
Monthly Google Analytics reporting isn’t required for shareholders and doesn’t tell you how much money you have in the bank. It does, however, tell you who is visiting your website, what they’re searching for, how many visitors you’re getting, demographics, and ultimately how to get more customers to make a purchase.
What makes Google Analytics so great for small businesses is that this incredibly powerful resource is free to use. It’s a strong troubleshooting device that can indicate where people are losing interest on your website so that you can make it more appealing to improve conversions. You can even set up event or goal tracking to determine who is getting to your checkout page before abandoning a cart and who is clicking through to make a purchase or inquiry. Customize your reports to suit your needs.
Why Reporting Matters
There are a lot of businesses owners that operate blindly and do just fine. There are others whose ignorance about what’s happening in their business ultimately causes their demise. If that first business owner took the time to understand their business, think how much more successful they could be. If the second business owner knew what was happening, he or she might have been able to save the business.
Reporting gives business owners insight into if their business is successful in a very real way. By incorporating these reports into your monthly and yearly accounting protocols, you’ll be able to make logic-based decisions to better your business.
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