5 Essential Accounting Reports To Manage Your Company’s Financial Health

There are many ways to analyze financial data, and depending upon how sophisticated your software is, you may be able to create customized reports with all sorts of bells and whistles. However, there are five essential reports that any accounting system should provide, no matter how basic the software.

1. Income Statement

The income statement shows the company’s earnings, the costs incurred to generate those earnings, overhead costs and profit. In either detail or summary form, this report reflects the balances in all the income and expense accounts.

Gross income, at the top of the statement, shows revenue the company has earned for a given period. After direct costs and overhead expenses are subtracted, the net result, or bottom line, shows the amount of profit that remains.

  1. Balance Sheet

The balance sheet illustrates the primary accounting equation, assets equal the sum of liabilities plus equity. Or stated another way, what you own (assets) minus what you owe (liabilities) equals the company’s net worth (equity), which includes owners’ investments and accumulated profits.

Three of the balance sheet’s critical points of interest include cash on hand, accounts receivable (A/R) and accounts payable (A/P). The reports that provide detail supporting the A/R and A/P balances are discussed below.

3. Accounts Receivable Aging

The accounts receivable aging report is a detailed ledger, the total of which should equal the A/R balance on the balance sheet. It shows the amounts that are owed to the company by each customer. Those amounts are placed in aging columns in 30-day increments to show how long the balances have been outstanding. The older the invoices, the less likely they will be collected, so it is vital to keep an eye on this report.

4. Open Accounts Payable Ledger

The accounts payable ledger is a listing of all unpaid amounts due to vendors. The total on this report should tie to its corresponding value on the balance sheet. This report can also be produced as a projection report, based on when payments are due, to anticipate expenditures and manage cash flow.

5. Revenue Analysis Reports

The revenue on the income statement tells you how much you have generated, but further analysis can tell you where that revenue came from. Analyzing revenue by customer, type of customer, geographic location or salesperson, can help inform marketing decisions and evaluate individual sales performance.

Accurate accounting records provide a great deal of useful information. These five essential reports give a snapshot of the company’s financial health at a point in time and offer helpful information for making business decisions.

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