Entrepreneurs often overlook the importance of financial reporting and analysis.

Financial reporting not only tells the story but also the future of your business.

Many intelligent business owners invest very little in their training or experience with financial reports.

But, what if we told you that regular financial reporting and analysis could help find extra cash for your business?

Then would you spend more time learning to read and understand financial reporting?

One Source Services, Inc. dba Sherman Oaks Accounting & Bookkeeping loves to show business owners where to find extra money!

For instance, we can make a difference by simply examining a company’s accounts receivable terms.

Imagine a business earning $25 million in annual sales. Their standard A/R terms are net 45 days. Simply reducing those terms to 30 days could potentially add almost $1 million to the bank! That’s without increasing sales a bit, just by cutting terms by 15 days.

Additionally, regularly reading and analyzing financial reporting such as the balance sheet, income statement, and cash flow statement often exposes uncollected sales sitting in accounts receivable, perhaps from a shift in credit policies over time or because of slower collections.

Money in the bank is better than money on the books!

The information derived from regular financial reporting helps business owners discover vital information to make more informed decisions, have more efficient operations, and increase profits.

To stay on top of how growth is being managed, a business owner must use financial reporting to check their margins often.

A business owner can proactively identify cost increases before they outpace revenue gains by looking at gross profit, or the difference between revenue generated by a product or service and the cost that went into providing that product or service, especially across numerous time periods.

Regularly reviewing gross margin allows managers to take actions to reduce costs when necessary, like negotiating new vendor prices or improving production inefficiencies.

Another important number is the operating margin, obtained by comparing sales with the operating income, which is the amount of profit remaining after the cost of goods sold, wages, and depreciation have been subtracted.

Monitoring operating margin over time will show whether a business’s cash position is getting worse or improving. The impact of pricing strategy and operating efficiency can be clearly seen here.

It’s important to know as soon as possible when something is changing, such as a sales increase that’s decreasing profits.

We also closely monitor cash flow from operations found on the cash flow statement.

This line identifies how much money is being generated from operations.

Negative cash flow from operations is usually a big red flag that something is wrong with the business.

One Source Services, Inc. dba Sherman Oaks Accounting & Bookkeeping strongly believes that all business owners should be familiar with their business’s financial reporting and know what it means to their business.

Although financial reporting illustrates where a company is right now, it’s especially useful in identifying and analyzing trends.

Regularly looking at a few key financial reporting items will help a business owner continue to build value in their business, even during inevitable economic downturns.

Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. meets with each client several times a year for financial reporting sessions.

We explain in plain language what key numbers are, what the data means, and then collaborate on an improvement plan.

Don’t wait until tax time! Early financial reporting and analysis contributes to better tax planning and reduced liabilities.

Our financial reporting specialists are available to train and familiarize business owners on how to collect, analyze, and utilize meaningful financial data in financial reporting.