Business owners are pressed for time, and often depend on their accountant to take care of the financial documentation. Fair enough! But as a business owner, you should at least keep yourself informed about the financial performance of your company. Reviewing your company’s financial reports on a monthly basis will help you identify and fix any small issues before they turn into a major financial setback. If you want to save time and money on setting up and generating financial reports, consider using cloud accounting services in Singapore or Xero accounting software. However, no matter how accurate and detailed your reports are, you need to review them to make timely, strategic business decisions. Let’s find out what to review and how!
Check for any inconsistency in overhead expenses
When reviewing your monthly financial reports, check whether your overhead costs for the month are consistent with those of the previous month. This should be done by comparing financial reports of the two consecutive months. If you find any sudden increase in overhead expenses, you should dig deeper to find out the source of the problem.
Check whether your net profit is consistent with your budget
Check your monthly income statement and find out your net profit for the month. If your net profit is far below your expectation or monthly forecast, find out the cause of the shortfall. Maybe you are overspending or not selling enough. Or perhaps some external factors, such as, interest rate movement and changing market demands are affecting your net profit. In any case, you need to discover the root cause of the problem, and modify your business strategy accordingly.
Review your accounts payable aging report
Cloud accounting service or software like Xero allows you to generate accounts payable (A/P) outstanding report by project, date, or vendor, and even in multiple currencies. You should generate the reports and review them every month to make sure your invoices and outstanding loans do not go unpaid. Timely payment of monthly bills and invoices will help ensure that you do not end up paying late fees or additional interests.
Review your accounts receivable aging report
This report provides you details about the money that your customers owe you. Xero enables you to create A/R outstanding report by date, vendor and project. By reviewing those monthly reports, you can quickly find out where the money is. Once you track down customers that owe you money, consider taking the necessary steps to collect the dues from them as soon as possible.
Review your cash flow statement
If cash is the lifeblood of a business, then it must flow uninterrupted to keep the business alive. That’s exactly why you should review your company’s cash flow statements every month. Simply put, cash flow statements give you an overview of your liquid cash. You can also review cash flow projections. If you notice any signs of danger, consider taking the necessary steps well in time to avoid any major financial setback.
Business owners should also review the balance sheet after every few months to get a clear picture of the company’s assets and liabilities. You can easily generate these reports, using cloud accounting services. Only through these ways, you will be able to stay on top in your accounting.