Balance sheet
What is it?
This is a snapshot of your business finances at a single specific point in time (Assets – Liabilities = Equity).
What is it used for?
To see the actual value of your business (equity) by subtracting what you OWE (liabilities) from what you OWN (assets).
What does it contain?
- Assets: What you own, or what puts money in your pocket (e.g. cash, property, business equipment, investment funds, A/R, inventory, etc.)
- Liabilities: What you owe, or what takes money out of your pocket (i.e. bank loans, mortgages, A/P, employee salaries)
- Equity: This is the difference between your assets and liabilities (AKA overall value of the company)
- Accounts receivable: A/R Total ties to “Customer Balance Report”
- Accounts Payable: A/P Total ties to “Vendor Balance Report”
Profit & loss statement
What is it?
This is an overview of how profitable your business is over a period of time (typically a year).
What is it used for?
It helps identify your most profitable seasons, locations, revenue types, etc. It also shows if you’re operating at a loss, breaking even, or profitable.
What does it contain?
- Profit & loss: Also called “Income Statement”
- COGS (Cost of goods sold): Expenses specifically incurred to create revenue (e.g. cost of materials, direct labor)
- Operating expenses: Expenses related to running the business (e.g. office rent, utilities, marketing + advertising, cell phone)
- Other income: This is one-off income, like selling a building, and is not related to your usual operating activities
- Net income: Also called “net profit”, this is your all important bottom line (literally!)
Cash flow report
What is it?
This report shows you how much cash is entering and leaving your business, and if it’s from operating activities, investments or financing. (It’s usually not as
helpful for small service-based businesses).
What is it used for?
It shows your business’ liquidity and if you need to inject/fund money into your business Banks want this report when you apply for a loan, to make sure your business is self-sustaining. Using multiple reports to compare cash flow over multiple periods, you can predict long-term cash flow for long-term business plans.
What does it contain?
- Operating activities: Cash earned or spent in the course of regular business activity – the main way your business makes money, by selling products or services.
- Investing activities: Cash earned or spent from investments your company makes, such as purchasing equipment or investing in other companies
- Financing activities: Cash earned or spent in the course of financing your company with loans, lines of credit, or owner’s equity.
Customer balance report
What is it?
This report shows you what each of your clients owe you, and when it’s due, broken out by invoice and invoice balance.
What is it used for?
This report helps you get an idea of when you’ll have money and payments coming in. It also lets you know which invoices are past due (to send reminders and for collections).
What does it contain?
- Due date: Shows when the invoice is due for payment – which can help you anticipate when to expect income
- Amount column: This column shows the original total of each invoice
- Open balance column: This column shows what portion of each invoice is still unpaid
- Open balance total: This number ties to the A/R (Accounts Receivable) total on the balance sheet
Vendor balance report
What is it?
This report shows what you owe each of your vendors and when each invoice is due, broken out by invoice and invoice balance.
What is it used for?
This report helps get an idea of when you’ll have vendor invoices due and payments going out. It also shows you which invoices are due and when so you can prioritize which ones to pay.
What does it contain?
- Due date: Shows when the vendor invoice is due for payment, which can help you decide which bills to prioritize paying
- Amount column: This column shows the original total of each invoice
- Open balance column: This column shows what portion of each invoice is still unpaid
- Open balance total: This number ties to the A/P (Accounts Payable)
Help us help you
Nine best practices to help you accountant:
- Share password updates: We can’t help manage your finances if we don’t have access! Give us a heads up so we can securely update it on our end, too.
- New Bank Account? Tell us! Sometimes you need to open an additional account – just let us know when you do, so we can include it in our work.
- Closing an account? Tell us! If you’re looking to close a bank account, give us notice before you do so we can download all the info and docs we need first!
- Send you statements monthly: We understand, sometimes we won’t have online access to one or more of your accounts – but we still need you to send us your statements every month!
- Save your receipts: We’ll save and electronically attach any receipts you send to us; however, it is ultimately your responsibility to save and maintain your receipts for 7 years.
- Separate business and personal: This one is really important – not only do you need this to accurately handle your business taxes and finances, but also to protect your personal assets!
- Withdrawing cash from you business: Cash is especially hard to track. Every time you withdraw cash, you’ll need to let us know how it was used, or it may get categorized incorrectly as an owner distribution.
- Personal funds for business: If you use your personal funds to buy something for the business, let us know! We will need to record it as an owner contribution.
- Fill out those memo fields: We love having notes and breadcrumbs on all your checks and receipts – it saves us both SO much time! (P.S. Please make sure your handwriting is legible!)
