Financial Report For Small Business – You have come to the right place. With our CFO-approved small business financial report template, you’ll get an in-depth overview and explanation of all the important financial metrics for your business. Whether you’ve been running your business for a couple of years or decades, let our certified team with over 17 years of experience help you.
My name is Matt Krieger and I am the founder of Krieger Analytics, a CFO, consultant to small businesses and franchisors. I am also the owner and franchisor of the Monkey Bizness concept in Denver, Colorado.
Financial Report For Small Business
As a small business owner with a background in finance and strategy, I understand the benefits a CFO can bring to small organizations. Most franchisors and small business owners don’t need (or budget for) a full-time CFO. To better suit my clients, Krieger Analytics is an incomplete resource. While most people think that CFOs do finance and accounting (we do), I also do a lot more. I partner with my clients, coaching them on strategy, gaining clarity in their business, creating efficient and effective processes, and making confident business decisions. The conversations are free, so feel free to contact me at [email protected]Using financial statements, small business professionals can uncover the truth about their business, allowing them to make more informed decisions and create effective growth strategies.
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The information gained in this way allows them to avoid cash flow problems and other obstacles that are known to plague small businesses.
In this article, we’ll look at the ins and outs of seven of the most important small business financial reports, from cash flow statements to weekly sales reports.
A good understanding of them ensures that you are in control of your business’s performance, future and money.
Along with the income statement and the balance sheet, it is one of the three most important financial statements for a small business.
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This helps billing teams and business owners ensure they have enough cash to support their ongoing operations.
For example, if they planned to hire five new sales representatives, but noticed that cash flow was likely to drop severely over the next six months, they might have to delay the expansion.
The clarity provided by the cash flow statement makes it, according to a databox survey, the most important metric for small businesses to track:
The statement of cash flows differs from the income statement and balance sheet in that it takes into account only transactions and related activities that are carried out with cash or cash equivalents.
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This is because businesses cannot easily finance operations with non-cash assets. They can’t pay their electric bill with accounts receivable.
The statement is about liquid assets, so it can inform businesses about what they can and cannot afford to do in the near future.
As you will see in the example cash flow statement below, the report is divided into four main sections.
The first three are cash flows from operations, investing, and financing activities, and the last is the net increase (or decrease) in cash during the year.
Financial Report Sample For Small Business Template
Note that numbers in parentheses represent cash outflows, such as capital purchases or dividend payments, while numbers without parentheses represent cash inflows.
Maybe that means operations have become more efficient and less costly, or they’ve collected a lot of overdue invoices sitting in AR.
For example, a company may take out a loan to save itself from bankruptcy, thereby increasing cash, but only for a relatively short period of time.
It is common for small businesses to create a cash flow statement each month, which makes it easy for them to see cash flow trends over longer periods of time and ensure that their operations are sustainable.
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An income statement, also known as a profit and loss statement, reports the profitability of your business over a period of time, recorded as net income or loss.
The report takes into account total income and expenses for a given period to provide an overview of the financial performance of the business.
In the example above, the company has been profitable for three consecutive years. You can see this by looking at the “Net Income” section on the last line.
However, some new businesses may operate at a loss for strategic reasons, such as to enable faster growth.
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Airbnb, for example, is still not profitable, probably because they are reinvesting the money they make to fuel that growth.
In terms of who uses it, the income statement is most valuable to internal stakeholders, such as board members, and external stakeholders, such as investors or creditors.
Typically, small businesses report their income quarterly and annually to monitor profitability and identify areas where expenses are too high or revenue is too low for them to make adjustments.
Rounding out the triad of essential small business financial statements is the balance sheet, which reports your business’s current assets, liabilities, and stockholders’ equity at a specific point in time.
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As you can see, the balance sheet is divided into two sides: assets and liabilities, on the one hand, and shareholders’ equity, on the other.
A balance sheet is critical for those seeking a loan from lenders, as these lenders will use it to determine your creditworthiness, which affects the interest rates on your loans or other extensions of credit, as well as their likelihood of investing.
The main method used in this case is financial ratio analysis, where you use formulas to get an idea of the financial and operational health of your business.
For example, you can compare the balance sheet to the income statement to assess how efficiently your business is using its assets.
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And you can use the debt-to-equity ratio to see how well a business is able to meet its debt obligations and thus the risk of investing.
You noticed above that company #2 has a lower debt-to-equity ratio and will therefore have an easier time paying off its debts, which qualifies it as a low-risk investment.
In general, the balance sheet is one of the most important financial statements that accountants and small business owners must create on a regular basis.
The Accounts Receivable Aging (AR) report tells you how much money your customers owe your business and in what month you can expect payment.
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By reviewing this report, you can forecast your cash flows and plan your business operations and expenses accordingly.
For example, in the report below, a company knows that it can expect to earn $25,000 next month from customer XYZ Ltd:
Consistent preparation of this report should be part of a robust accounts receivable management process, which should also include tracking payments, conducting collections and even establishing a customer’s credit rating.
While it is possible to create an AR aging report and perform some of these other tasks manually, most small businesses choose to automate their accounts receivable management with invoicing software platforms because it saves them time and reduces human error.
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Regpack’s online payment software is one such tool popular with small business owners as it allows them to easily track their ARs, send automated invoices online, and generate insightful reports on invoice history and payment activity.
In general, a small business that keeps its finger on the pulse of its accounts receivable will collect money faster and avoid cash flow problems down the road, and the AR aging report is one of many tools used to make this possible.
The AP Aging Report shows you who you owe and when. Generally, bills are paid within a thirty-day period.
Knowing how much they have to pay this month, next month, and so on, gives small business owners the knowledge to make sure they have enough cash on hand during those time periods to pay their vendors.
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For example, if a business owner was considering investing in new equipment next month, but then saw that the total AP for that month was so high that they could not afford to pay suppliers and buy equipment, they would wait until later to make the purchase, or somehow increase cash flow as quickly as possible.
The bottom row provides a quick summary of the total amount of payments for each month, as well as information on which payments are overdue and therefore have priority.
Most of all, the accounts payable aging report helps small businesses avoid cash flow problems caused by not knowing future cash outflows.
In light of the fact that 82% of small businesses fail due to misunderstanding or mismanagement of cash flow, this point cannot be neglected.
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If only we small business owners could always stick to our budget. Unfortunately, the unpredictability of life makes this an ideal rather than a reality.
It’s not all bad as long as you keep track of variances and try to continually minimize them by improving your budgeting skills.
The Budget vs. Actual report compares your expected expenses and income with what you actually paid and earned over a period of time (often a month).
This report shows how close your business is to budget for each category, as shown below:
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Using such a report, you can easily see the difference between the expected and the reality
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