We all know that financial reporting is required for our BAS reports and for tax time, but how many of us aren't considering how important financial reports are to our business's growth and everyday operations?
Small business managers usually have a good understanding of their profit and loss reports, but what about their balance sheet and business financial ratios? A business can use ratio analysis to understand the strengths and weaknesses of their business by looking at financial trends over time. These trends help with strategy development and planning, which in turn improves business growth and helps with future business expansion.
While you're not expected to be a professor in accounting, you should have the foresight to engage a business consultant or an accountant to help with ratio analysis and business strategies. Remember that they will need accurate and current records to be able to provide your financial performance reports.
Updated Books Give You Glanceable Insights
Did you know if your bookkeeping is kept up to date, a single glance at your balance sheet will tell you exactly what your GST and payroll liabilities are? If you're a sole trader worrying about your income tax liabilities or how much you should be putting aside, your updated balance sheet will provide a good estimate and can be calculated from your current profit and loss report.
Sometimes we all need a little bit of a reminder about our cash flow situation and what’s generally going on, and there’s no better way to get that than through glanceable accounts payable and receivable reports. This helps us chase up money owing sooner rather than later and makes sure all expenses can be paid on time, helping keep a strong and stable relationship with suppliers.
Why Keep Books Updated?
There are a couple of other really good reasons to keep on top of your books on a regular basis.
Firstly, unless you have the memory of an elephant, you’re not going to remember what a transaction was for eight months ago!
Secondly, if you pile your bookkeeping into the 'I'll do it later,' basket you'll still have to do all that reporting for the entire year at some point, so leaving it until that last month doesn’t only open the door to errors, but you can't just ignore all those missed transactions.
Best bookkeeping practice is to develop bookkeeping procedures and stick to them on a regular basis. If you're a fast-paced business, get your accounts sorted and reconciled at least weekly.
We highly recommend other businesses get their accounts reconciled at least monthly. And if payroll is thrown into the equation, remember the Single Touch Payroll (STP) rules to submit your reports at each pay event.