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Understanding your financial reports, or knowing your business results, is significant to your business success. It allows you to form greater business decisions, measure the impact of these decisions, take corrective action where necessary and, ultimately, enjoy greater results.
By understanding your financial reports, you will:
- Know if your business is healthy
- Understand the value of your business
- Make better decisions
- Compare your actual results to your budget
- Discover trends in your business and respond as a result of these trends
- Identify areas of strength and weakness in your business
How to maximise results from your reports:
1. Ask yourself, is the data correct? This means that all transactions processed have been coded correctly and bank accounts have been reconciled.
2. Know which reports to use. Each report gives you different information. Your Profit and Loss Statement measures your income and expenses; the Balance Sheet measures your assets, liabilities, and net worth.
3. Conduct analysis over different periods. This means comparing the current period with previous periods (horizontal analysis) and calculating each item as a percentage of a base item (vertical analysis). For example, comparing this year’s Balance Sheet with last year’s and calculating each expense item as a percentage on your Profit and Loss Statement.
4. Choose the correct date range. Ensure you correctly specify the start and end dates for the period you want to measure. Choose a month end date, such as 30 Dec instead of 15 Dec, to ensure all income and expenses have been coded and reconciled for the period.
5. Are the results what you are expecting! Do you have goals or targets for your business? Are these results what are expecting?
By understanding your financial reports, you will know more about your business's numbers and be able to use that information to make greater decisions. Whether you want to grow your business or increase efficiency to use your time effectively, we can help your business grow with an optimum tailored solution.
Drop us a line at Optimum Business Advisory & Accounting Professionals to discuss these details further on (02) 9821 2455 or email@example.com.