Have you ever wondered why your bookkeeper gives you four main reports? Have you ever wondered why these particular four reports are included and what they actually mean? This article will share the purpose of the four main reports and why you should be looking at them. Think of your reports as a vehicle to tell your business’ story. Are you listening?
The Balance Sheet is telling the story about where you stand at a specific date in time. It will tell you what you own, what you owe, and what the owners of equity have invested in the business. An accurate Balance Sheet is very important because if a transaction appears on the Balance Sheet that really should appear on the Income Statement, the net profit for the period will be overstated or understated.
The Income Statement (also known as the Profit & Loss Statement) tells the story of your business for a specific period of time. It tells what your revenue for the period was, your expenses, and if you made a profit or had a loss for the period too.
The Income Statement is obviously a very popular report with most business owners. But the Income Statement is not the only report that tells the story of how your business is doing, so make sure you are paying attention to the other reports too.
Aged Accounts Receivable
The Aged Accounts Receivable Report tells the story of who owes you money as of a specific date. It also breaks down how long you have been owed the money. This report can help you to know who you need to follow up with regarding past due invoices, if you should change your terms with any of your customers, and could even tell you if there are certain customers that you should stop selling to. This story is important to listen to so that your business remains healthy.
Aged Accounts Payable
The Aged Accounts Payable Report tells the story of who you owe money to as of a specific date. It tells who you owe and how old the bills are. This report can let you know if your business is having trouble paying your bills on time. This story is important to listen to because not being able to pay your bills in a timely manner could mean that your business is not doing well. Generally, a healthy and profitable business pays its bills in a reasonable fashion.
These are the four reports that we think are important to look at regularly and to hear the story of the health of your business. We generally provide these four reports to our ongoing clients on a regular basis and discuss each client’s story together. Of course, there are many other reports that are useful too. We will continue sharing our favorite reports from Xero in future blogs. So stay tuned for more!