To keep track of the financial ups and downs of your small business, there are three important reports to reference: balance sheet, cash flow statement, and income statement. Although there are countless other reports, these three will give you the best idea of where your business stands and where it is headed. Each report provides its own window to further understanding the financials of your business. We challenge you to run these reports once a month to maintain a firm understanding of where your small business stands!
Also known as statement of financial position, this report lays out a company’s liabilities (how much your company owes), equities (amount invested in business), and assets (what the company owns). It can be broken down into a simple solution: liabilities + owner’s equity = assets.
Liabilities are things like accounts payable, loans, and debt. The owner’s equity includes startup capital and retained earnings. Another helpful equation to remember when determining equity: total assets - total liabilities = equity. Assets could include things like cash, land, property, equipment, and beyond.
In QuickBooks, there are five different kinds of balance sheets that can be made. To run a balance sheet report, click File > choose the account you want a balance sheet created from > Reports > Company & Financial from dropdown menu > choose the tip of balance sheet you’d like. The “standard” version will show your assets, liabilities, and equity for a set period of time.
Cash Flow Statement
This report examines your company’s profitability by focusing on where your money comes and goes on a day-to-day basis to further understand your company’s cash flow. There are three areas the report focuses on: financing, investing, and operating. See how well your company generates cash to pay expenses, employees, and more.
In QuickBooks Online, you can predict your cash flow by using the Cash Flow Forecast: Reports > Company & Financial from the dropdown menu > Cash Flow Forecast. A report will appear that compiles your receivables, payables, and bank account for a set period of time that you can customize. To compare this projection with previous ones: Reports > All Reports > Business Overview > Statement of Cash Flows. This will show your small business’s actual cash flow, not just a projection.
You may also hear this referred to as a profit and loss statement. An income statement reports if your company made or lost money during a set period of time, and helps project sales and earnings in the future, by showing your net profit.
To run this report in QuickBooks: Reports > Company & Financial from the dropdown menu > Profit & Loss Standard. Your report will be displayed for a set period of time, however you can edit this to compare.
For more information on running or understanding these reports, contact Skynar Bookkeeping.