You need to be and it’s easier than you think it is. And doing it every month can help you save SO much time, stress and money. So let’s walk through it all together:
1 – UPDATE and reconcile your transactions every single month (weekly is better). Otherwise, the reports will be useless.
2 – RUN the three main financial reports:
PROFIT + LOSS (P&L): This report tells you if your business making money (or not)
CASH FLOW STATEMENT: This report tells where your money is going
BALANCE SHEET: This report gives you a snapshot of the current value of your business
Now that you’ve got the reports – what do you look for? And what does it mean?
Here’s 4 key numbers:
Net Profit – This tells you if your business is profitable, and if your profits are heading in an upward (or downward) pattern
Accounts Receivable – This tells you if have a lot of unpaid invoices (and if you need to go after some slow-paying customers)
Expenses – Compare your expense trends with your revenue growth. Are your expenses growing faster than revenue? (That’s a red flag!) And that’s just scratching the surface.
Monthly reports can also help you plan your quarterly taxes, and will help protect you in case of an audit!