Getting financial reporting sorted and on time is one of the biggest concerns of small businesses. But, being timely is not enough; you must make it a point to make your business accounting reports accurate and complete. If your reports are not correct, they will not be of value to your team.
Small business financial statements must be precise and have a significant impact on your business health. Striking the right balance between accuracy and punctuality will help you devise an efficient financial reporting strategy.
The right online invoicing software can help you achieve it and reduce your administrative workload greatly. But, before we move on to the tips to improve your financial reporting and data flow, let us know more about the former and its importance.
What is financial reporting and analysis?
To evaluate a company’s performance and take measures to innovate and boost financial abilities, stakeholders need a complete and transparent view of that organization’s financial position. Accurate records of revenue and expenses, capital/cash flow, and profits are essential in providing insights needed to make informed business decisions.
In addition, financial reporting standards must be adhered to as they help in preparing income statements and organize other financial information. Besides, they will also let you document your firm’s operating activities without any hassles.
Financial analysis is usually done via metrics known as key performance indicators or KPIs. Companies use metrics like these worldwide to evaluate and improve performance.
Using accounting software equipped with data analysis and business intelligence, finance professionals can access actionable insights and use them effectively.
Here are some financial reports used by small and medium-sized businesses.
- Income statements are used for comparing revenue generated vs. expenses incurred to measure profitability for a given time period.
- Balance sheets compare assets and liabilities. Balance sheets provide information on a company’s overall assets, r shareholders’ equity, working capital ratio, and debt-equity ratios. However, they are not ideal for capturing the whole picture. It is suggested that they are used in sync with other metrics to gain maximum strategic value.
- Cash flow statements document the amount of money flowing in/ out of your company for a set time period. It is essential to have these reports as they help you meet outstanding obligations, make strategic investments, and minimize risks.
- Financial performance dashboards are accessible via an accounting solution and provide dynamic and real-time financial reporting. Besides, these dashboards allow users to create graphs, custom charts, and tables that, in turn, can be used to examine working capital, track vendor payment error rates, cash conversion cycle, and perform asset valuation.
- Chief Financial Officer (CFO) dashboards provide high-level insights and relevant data for senior decision-makers. They connect financial performance to organizational goals and are helpful for leaders to analyze soft value metrics such as employee satisfaction.
Tips to improve your small business financial statements and data flow
Here are some tips you must use to streamline your financial reporting software and data flow.
1. Select the right accounting software
Irrespective of the accounting system you are currently using, you might not be using it to its full potential. These systems are used to generate business reports whenever you need them. Failing to integrate it with online invoicing software, inventory and tax modules, and business management solutions can lead to erroneous reports. The way to sort this is to list all the parameters you will need to analyze business performance and then generate reports. This will ensure smooth business performance at all times.
2. Keep your books in order
Accurate and timely financial reporting is the key to a smooth data flow. Unfortunately, most small businesses don’t make an effort to streamline this and have low-quality books. So, what can you do to solve this? Well, you can make it a point to appoint team members and track timelines. This will help you keep data and your financial reports in order.
3. Have clear financial calendars and approval processes
Most online invoicing software comes with intelligent dashboards that let you see all data at a glance. Still, it would be great if you make a month-end close calendar. It should include all parameters including task owners, approvals and sign-offs. Also, make sure that the tasks are completed within stipulated time and done as per the set parameters. Besides, an F&A team leader must supervise the whole project to maintain up-to-date status and timely financials.
4. Know the close calendar
While keeping your books in order is one thing, you must also know when they will be closed. This is because a lot of data needs to be processed before the close is complete. If you can coordinate your reporting with the close, you will be at ease with your financial management. You can also do the same with non-financial metrics such as bookings and customer service to stay in sync with all data owners.
5. Regularly review your financial statements
Well, this goes without saying that you will need to analyze your financial statements from time to time. But, not all of them require your full attention. It’s not that they are not necessary, but you need to focus on the following business reports: balance sheet, profit, and loss statements, and cash flow records. This will help you better understand your financial position, expenses, and how business changes affect the liquidity of your assets.
6. Keep account of every penny
Well, not accounting for small expenses can lead to inaccurate financial reporting. These include payroll, business expenses, and employee benefits. You must also take into account the recorded revenue and net profits. Online invoicing software can help you with accurate reporting. This will also help you maintain transparency with investors, and they will be able to establish trust with your business.
7. Identify key statistics
Are high taxes, exceeded budgets, or poor financial statements impacting your business? Well, key performance indicators, if identified early, can help you sort your business reports. Make it a point to track these indicators daily, weekly, quarterly, and yearly. This information will ensure that you never falter on your reports and are in the know-how of your business finances at all times.
8. Have real-time dashboard access
Well, having a navigable dashboard that displays key financial metrics makes it easy for you to analyze data. Besides, it will help you compare past reports and draw analogies for future improvements.
9. Hold regular meetings
Holding regular meetings with your financial advisor is a must if you wish to stay on top of your financial reporting. Monthly meetings and quarterly recap meetings can help you set the tone for the year. Not only will it keep your financial advisors accountable, but you will also be updated with your numbers and avoid surprises. Post that, you will be able to address your team’s concerns better.
10. Avoid multitasking
Implementing new or updated financial reporting measures can be challenging. But the key is not to do it all at one time. Instead, the idea is to make periodic updates so that you don’t need to do it on a regular basis.
11. Closely analyze historical figures
While you can always choose to outsource your work, you will need to analyze the historical figures to determine risks, trends, and other parameters. Then, based on your observations, you will need to build a model to forecast future projections. Then you will need to track actual figures against estimates to increase the accuracy of your model.
12. Analyze monthly trends
The next tip to streamline financial reporting is to perform monthly trend analysis. This will help you detect any data anomalies and other indicators that stand out. The idea is to look beyond regular income statements and consider the cost of goods sold and other expenses your firm may incur. By doing so, you will easily spot a trend before it becomes an issue and adjust your strategies accordingly.
13. Leverage predictive technology
With basic online invoicing software, businesses can generate timely reports and clearly understand their current financial health. In addition, combining predictive analysis will help you analyze what happened in the previous period and forecast future performance.
14. Automate and review your processes
Automating your accounting and keeping business records in order can easily be done with online invoicing software. At the beginning of the financial year, you will need to take out time and ensure all records are up-to-date. There are many online accounting systems available in the market segment, and small businesses can use them to scale their business.
15. Outsource financial reporting
Well, having dedicated accounting software does not mean that you cannot outsource your financial reporting. Not only do these professionals have extensive expertise, but they will be able to understand the KPIs of your business better and achieve business objectives with ease.
All these tips will help you improve financial reports for your business and smoothen data flow. When you have the essential data at your tips, you will be able to derive key insights, create budget estimates and better manage your finances. Luckily, business reports can be easily made with online invoicing software, and you will no longer need to spend hours making these.
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