Many business owners do their own bookkeeping as a way to save money and monitor the financial health of their business firsthand. If you do it properly and regularly, you can keep your finances organised and manage problems as they arise.
When managing your books, the most important financial reports are:
Our financial statements template has examples to help you do each of these reports.
The P&L or income statement is a summary of your business’s income and expenses over a period of time. It’s prepared at regular intervals – usually monthly and at the end of the financial year.
Your P&L allows you to:
For example, you might notice an increase in business expenses that forces you to re-price your goods to keep making a profit.
A P&L is also often used by banks in decisions about extending finance.
Use our financial statement template to create a P&L. Add as many categories into the spreadsheet as you need, particularly in the sales revenue and expenses area. Try to do a monthly report so you can better understand your income and costs and stay ahead of potential losses.
Your business’s profit (or loss) is the difference between your income and your expenses. Our guide can help you calculate this amount in a profit and loss statement (P&L), and give you tips on increasing sales and minimising your business expenses.
You can also attend one of our financial management workshops to learn how to read financial statements, and calculate profit and loss or the cost of goods.
A cash flow statement is a summary of money coming into and going out of the business for a set time period. It’s prepared monthly and at the end of the financial year.
Use the financial statement template to prepare a cash flow statement.
Net operating cash flow is the amount of cash that a business has after paying its bills. Overdue bills don’t affect the cash flow statement until they’re paid in cash.
A cash flow forecast will help you measure and monitor how the business is operating.
Cash inflow and outflow can come from many different activities, including:
Operating activities are the day-to-day results of buying and selling goods and services. They usually include:
Investing activities include investments in future business activities – for example, buying and selling fixed assets. This type of cash flow can include items such as:
Financing activities are how a business finances itself. They include:
The cash flow statement can provide helpful warning signals to avoid future financial troubles. Some potential warning signs are when:
The balance sheet is a general snapshot of the financial health of a business on a given day. You would normally complete a balance sheet at the end of a month or financial year.
Once you have a profit and loss statement and cash flow statement, you can complete a balance sheet. A balance sheet includes:
You can prepare a balance sheet in the following ways:
Our guide can help you choose the right business accounting software for your needs.
Learn how to stay in control of your business finances, pay your staff on time, maintain cash flow and meet all your tax obligations.