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If you’re a small business owner, you want to make sure your business is a profitable enterprise. You want to know how much cash your business is generating and how far you can extend yourself in credit with your vendors and suppliers. You’d like to have a snapshot or overview of your business performance to aid in negotiating for more funds from bankers to expand your activities. Business reporting is therefore a critical facet of running a small business.

Profit and Loss Account

The primary business report that you need at the end of every month, depending on the volume of activity, is the monthly profit and loss account or statement. This is prepared for a one month period in the case of monthly accounts and a three month period in the case of quarterly accounts. The profit and loss account shows how your sales or revenue is converted to the net profit.

Revenue is the amount of sales that you’ve made to your customers. The revenue figure will be a net figure after accounting for sales discounts and any allowances that you have afforded your customers. Each sale will be supported by a customer invoice that details that type of product sold or services rendered and the corresponding value. A gross profit figure is arrived at after deducting the costs directly attributed to the sales. A gross profit margin is arrived at by dividing the gross profit with the sales figure – this will show the percentage of profit earned from sales to customers.

The expenses reflected in the profit and loss account are the expenditure that you have incurred in the course of your business operations and which are attributable to the business activities. These include general and administrative expenses such as insurance, utilities and salaries. Such expenditure is necessary to manage your business. There will also be selling expenses such as travelling, commissions and advertising that have been incurred to sell your products or services.

The net profit figure is the total profit that your business made after deducting all the relevant expenditure. This is the figure that actually determines the profitability or otherwise of your business. If your business made losses, you are able to determine from an analysis of your expenses in the profit and loss account which of your expenses was a major contributor to your loss. High net profits may predict strong future profits for your business. You can also assess whether or not your business will be able to generate sufficient cash flow in the future from a review of your profit and loss account.

Balance Sheet

A bookkeeper will prepare the balance sheet after completing the profit and loss account. The balance sheet is a snapshot of the financial position of your business at a specific point in time. In monthly accounts, the balance sheet date will be the last date of the month and shows the financial position of the business as at that date. At the financial year end, the balance sheet will reflect the financial condition of the business on last day of the financial year.

The balance sheet is a summary of the balances in your business. It gives the breakdown of assets and liabilities in your business as well as your equity, as the business owner. The net worth of your business is denoted by the equity figure. This is actually derived by subtracting all the liabilities from the assets. Showing the net worth of the company is the primary function of the balance sheet.

The balance sheet can be presented in a format that shows the assets on one column with the liabilities and equities on the corresponding column. Both the columns will then be equal in value, or balance. This gives rise to the balance sheet term. Contemporary balance sheets are presented in a single vertical section for many businesses with the assets recorded first followed by the liabilities and equity.

Cash Flow Statement

The periodic accounting statements that your bookkeeper prepares must include a cash flow statement. This crucial statement shows the movement of cash into, and outside of, your business. The cash into your business comes from your customers who have paid for products bought or services received. The cash outflow is primarily due to payment of trade and other creditors. A net inflow of cash indicates that your business is liquid.

Even if your business is profitable and shows a strong net profit figure in your profit and loss account, if you don’t have enough positive cash flow then you run the risk of business failure or bankruptcy. You won’t be able to service your debts as they fall due. Cash shortages are a red flag and demand immediate attention. If your business is haemorrhaging cash, your bookkeeper will be able to point this out to you from the cash flow statement. You can discuss ways of stemming the cash outflow perhaps through buying your equipment instead of leasing them.

With a cash flow analysis, you can determine if you need to speed up your customers in settling their debts. You would be able to negotiate longer credit periods with your suppliers to lag payments to trade creditors. In fact you can obtain an excellent understanding of the cash flow situation of your business and take steps to adequately manage cash to remain both liquid and profitable.

Business reporting encompasses the financial statements which are critical for the efficient running of your small business. Three very important financial statements are the profit and loss account, the balance sheet and the cash flow statement. Bookkeeping Central (http://www.bookkeepingcentral.com.au) provides comprehensive accounting services through the services of bookkeepers for small businesses. Your business will be far better managed with accurate bookkeeping services that are timely and cost effective. By using the professional expertise available at Bookkeeping Central (http://www.bookkeepingcentral.com.au), your business will benefit from accurate periodic financial statements that provide you with critical information about the profitability and liquidity of your enterprise. With a great bookkeeping partnership, your small business is assured of accounting and financial reporting.

        

So you’ve decided to take the plunge into the exciting world of business. Starting a new business is one of the most satisfying ventures to undertake as you’ll be working for yourself and watching your efforts bear fruit. You need to set up your business in the right way to ensure your enterprise runs smoothly without any hiccups.

Initial Setting Up of Your Business

The first thing that you have to do is decide on what sort of business structure you’re going to need for your particular service. Perhaps you’re a plumber and want to start a plumbing service business as a sole proprietor. That means that you’re starting your business as an individual who’s trading on their own. Now you’ve got to choose a name for your business. You may want to select a name like ‘Payne Plumbers’ to better identify the type of business you’re conducting.

Once you’ve decided on the name for your business, the next step is to apply for and register your business name with the relevant authorities. In Australia, you have to register your business name in the Australian state or territory in which you plan to operate. Before you can register your chosen business name, you must first check to see if the name is already registered as a business. If it hasn’t, then you can go ahead and register your business with the relevant State Consumer Affairs Department.

Next, you have to apply for an Australian Business Number or ABN. This is a unique 11 digit number which is exclusive to your business. You’ll use this number when transacting with other businesses or customers. It’s important to include your ABN on your sales invoice otherwise your debtors have the right to withhold 46.5% of any payment due to you. It’s necessary to have an ABN to facilitate communication and dealings with the Australian Taxation Office or ATO.

Another important reason why you’ll need the ABN is because it’s necessary to register your business for Goods and Services Tax or GST. You now have to register for GST to ensure that you can both charge and claim GST credits on your sales and purchase invoices. It’s vital that all your invoices to customers include a 10% charge for GST. You’ll also be charged GST on any supplies that you purchase. You must account for the difference between the GST paid by your customers and the GST you’ve suffered on your supplier invoices, to the ATO every quarter.

Sorting Out Your Business Accounts

This critical component of a new business start up cannot be stressed enough. Setting up your accounting system is vital if you are to get a good grip on the financial aspects of your business. You need to have a chart of accounts to classify the various accounts in your business in order to charge expenses and allocate payments. You must have monthly bank reconciliations performed to find out your true cash balances and what cheques have not cleared in the bank statement. You also need to reconcile your credit card accounts if you’re using your credit card for business purposes. You need to have proper debtor management systems in place so that you know the extent of your Accounts Receivable.

At the end of every month, you should be able to assess how well your business is doing from the monthly management accounts. You can determine how much income your business has made and how much you owe your suppliers. You’ll see your various accounts in a trial balance that ensures all the debits and credits are in balance.

All these functions are important for the smooth and efficient running of your business. You should use the services of an excellent <a href=”http://www.bookkeepingcentral.com.au”>bookkeeper</a> to ensure that your accounting records are maintained systematically, accurately and completely.

Connecting with an MYOB Partner

The most common business accounting software in use in Australia is MYOB or Mind Your Own Business. You should team up with an MYOB Approved Partner to ensure your business accounting requirements are efficiently handled. An <a href=”http://www.bookkeepingcentral.com.au”>MYOB Approved Partner</a> will utilise this cost effective, powerful and competent software to manage your entire accounting records from the Accounts Receivable and Payable to Invoicing and BAS.

The benefits to your business are multifarious as you’ll be assured that only state of the art and comprehensive accounting software is being used to record your transactions, update your accounts and invoice your customers. You can have access to timely support for MYOB services and be apprised of the latest software updates that further enhance performance.

Getting Your Business Off To A Good Start

As a new business owner, you’re most concerned about getting new clients and building your business. You’re focused on providing excellent services to your customers and retaining their custom. You’re driven and primed for quality output. You’re also often pressed for time with many activities and tasks demanding your attention at once.

Furthermore you need to have an online presence to add credibility to your business. Many people search for services on the internet and are often impressed if you have a website they can refer to for further information. You must have a registered domain name and have your website designed attractively to garner more traffic and optimised for better sales conversion. Your site has to be hosted on a reliable server to ensure you’re available on the Net 24/7 with no downtime or broken links. You must be able to communicate with your suppliers and clients via email, a fast and efficient mode of communication.

Bookkeeping Central (http://www.bookkeepingcentral.com.au) can provide you with all these primary services through their affordable and value for money new business starter packs. You’ll get the entire package from business name registration to having a website for an online presence. Your books will be carefully and meticulously looked after by this <a href=”http://www.bookkeepingcentral.com.au”>Australian accounting services</a> so that you can focus on growing your business. Get your new business off to a great start with Bookkeeping Central (http://www.bookkeepingcentral.com.au).