There are many different types of accounting reports that are used to reflect various aspects of a company’s financial status. However, there are four or five core types of accounting reports that are used by most small businesses. All of these are available from most small business accounting software packages:
Balance sheet. A company’s balance sheet is a snapshot at a particular point in time of its assets, liabilities and shareholder equity. The statement is essentially a list of the assets, debts and net value of the company, each broken out by category (long-term vs. short-term debts, for example).
Statement of profit and loss (P&L). A P&L statement shows a company’s income and expenses by category over a set period of time. It’s used for showing the strongest and weakest areas of a business, and is also used to compare a company’s recent performance to the same period in previous years to measure change.
Statement of free cash flow. This report shows how much cash is available to pay creditors or pay dividends to investors. To determine that amount, you take the total sales revenue and subtract your costs and operating expenses. This statement helps the company manage cash flow that isn’t required to continue operating the business.
Statement of shareholder equity. A statement of owner’s equity breaks down the net book value of a company into various categories to show shareholders exactly how much their investment is worth on paper (if the company were to be liquidated).
Accounts receivable aging. Companies that invoice use accounts receivable aging to show how long any receivables have been outstanding. Though some also use accounts payable aging to show how long any payables have been outstanding, for most businesses, it’s more important to account for the money you’re owed. What you owe appears in the liabilities section of a balance sheet, even if it’s past due.
Did You Know?Did You Know?: While there are multiple types of accounting reports that are available, three important reports you want to pay attention to is the balance sheet, a profit and loss statement, and a statement of free cash flow.
In addition to these core reports, there are many others, and many more permutations of each, adjusted to meet the circumstances of individual businesses and the preferences of their owners and managers.
Lots of executives create custom reports as well. These versions may focus on the areas of the business that management wants to track most closely, or compare recent results with those from the same time period last year.
Thankfully, accounting reports of all types can be easily generated using most off-the-shelf accounting software packages, and these reports can be updated continuously to provide up-to-the-minute (though unaudited) insights into what is happening in your business and the financial standing of the company.
If you’re going to invest in accounting software to help track your company’s finances, you should be sure it is capable of generating these reports easily. Some common options you should check for include:
The ability to adjust time frames and compare results to the same period in previous years
The option to specifically include or exclude individual accounts or line items
The ability to add notes explaining atypical results in particular accounts or categories
A way to create your own custom reports on your own template that shows the information that is the most important to you
These features will give you tremendous flexibility to dissect your company’s financials and make the most informed decisions about the management of your small business.