For every business, expansion is one of the most exciting phases. It draws in new customers, creates ample opportunities, generates higher profits, and the business grows in general. There can be situations where the company needs more financial analysis and reporting capabilities. It might be challenging to make informed decisions and grow and manage the business in the best possible way.
Financial client reporting is a critical business process that finance and accounting teams must appreciate and understand. It is a comprehensive review of periodic financial data that helps drive better business results and performance. An accurate financial report delivered on time helps understand a company’s performance and leverage opportunities to instigate future business growth.
Below are five key factors of financial client reports:
1. Profit and Loss
A business’s bottom line directly comes from the P&L (Profit and Loss) report, which is a company’s income statement. The bottom line is a P&L statement’s final line that shows whether a business has taken a loss or made a profit. Profit is the net income or earnings indicating how much a company earned during a certain accounting period after paying out all expenses.
Analyzing the P&L often helps do the following:
- Monitoring expenses and reducing them to increase profit
- Identifying the peak and low times for a business so that it can ramp up or cut back its sales strategies
- Showing the revenue trend, based on which the company can increase its revenue for sales and marketing or increase the prices of its products or services
Ultimately, it is only sustainable if the business makes enough profit. Financial client reporting helps a business owner stay focused on its bottom line and ensures earning enough money as expected.
2. Expenses
Running a business requires investments in expenses like equipment, training, marketing, transportation and office supplies. Depending on the business type, these expenses may grow fast and overtake the business revenue. Monitoring expenses through regular financial reporting helps a business understand whether it is losing or making money. It also includes a report that indicates the distinct categories of expenses.
Reviewing the expense patterns helps a business owner decide where to cut back if required. The primary idea is to ensure that the expenses do not grow faster than the revenue.
3. Accounts Receivable
Accounts receivable is the money a business owes, the sum of unpaid invoices. It appears in the balance sheet as part of the financial report. A company with cash trouble must look at the number of accounts receivable on the balance sheet. If it is a significant number, the business has a lot of money coming soon. Unpaid or later invoices often cause financial distress to SME owners. Keeping it in check ensures prompt client payments and cash flow.
Regular financial reporting offers payment reminders to keep things on track. Knowing the accounts receivable empowers business owners to make better decisions regarding their investments and when.
4. Finances by Client
Not every client is equal, as some are more rewarded than others. Apart from paying the biggest fees, they also help a company generate maximum profit. Getting a big-name client is exciting though it requires additional expenses, equipment, travel and insurance investment.
Although they pay more, they also cost more. On the contrary, smaller clients may pay less, but their projects might add up to the profit. Financial client reporting for different clients often works as an eye-opener to see what they are worth to the business.
5. Cash Flow
Conquering the cash flow is one of the most challenging concepts for SME owners. It refers to the actual income and expenses over a particular period. A cash flow statement shows the amount available by the end of a specific period. The business could still have cash flow issues even if the P&L statement shows a profit. Accounting experts suggest checking cash flow statements regularly to time the purchases and ensure prompt payment from clients.
These are the key factors in financial client reporting that help businesses track finances and make informed decisions. Experts recommend reading these reports regularly and adjusting their strategy as required. As the business owner gets used to data analysis regularly, they might find other reports that help measure the company’s success better. In the meantime, make these five key factors a priority in financial statements that pay off in the long run.
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