These reports may be generated monthly to monitor the company’s finances.
Balance sheet / Statement of financial position
- What it tracks: money earned versus money spent
- What it tells you: whether you had a profitable or unprofitable month
Cash flow statement
- What it tracks: the amount of cash earned by the business
- What it tells you:
This is useful for businesses that sell items on credit because it indicates how much money is available for spending.
Overdue receivables
- What it tracks: Who owes you money, how much, and when (or when it was) due.
- What it tells you: Which accounts to pursue.
Aged payables
- What it tracks: who you owe, how much, and when it is (or was) due
- What it tells you: cash demands and potential relationship risks
Why does it matter?
Together, these reports inform you of the value of your company, its profitability, and its ability to continue operations. The outcomes can affect your spending plans, pricing, projections, and customer payment terms. Moreover, the year-end versions of these reports reveal the amount of income tax you must pay.
Who generates financial statements?
Traditionally, a bookkeeper generates monthly reports to keep track of the business. Typically, accountants create year-end reports with the goal of minimizing taxes and establishing financial strategies for the following year.
How to generate financial statements
If you were manually creating reports, you would need to follow these steps.
- Balance sheet: Summarize the account activity for assets, liabilities, and equity.
- Income statement: Summarize income and expense account activity.
- Cash flow statement: Display the amount of available cash throughout the period.
- Aged receivables: Display which sales invoices remain unpaid. For any that are past due, indicate the number of days you’ve been waiting.
- Aged payables: Indicate which of your bills remain unpaid. or any invoices that are overdue, indicate the number of days the supplier has been waiting.
Bookkeeping software has made it possible for anyone to generate modern monthly financial reports with the click of a button. However, you must first ensure that all numbers have been entered, coded to the appropriate account, and reconciled. Some of these reports can be displayed in real-time on a dashboard that is updated daily.
Generally, the year-end reports are prepared by an accountant, who may make final adjustments to ensure that the business does not overpay taxes.
