Step 4: Run Reports, Analyze, and Revise
Now that all expenses and income transactions have been added to the books, it’s a good time to run reports and start analyzing!
QUICK TOUR:
- How to access Reports
- How to customize reports
- How to Save a report for quick access
- How to extract reports to Excel
3 Basic Management Reports
A. Profit and Loss – a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a month, a quarter or a year.
The basic parts of a profit and loss
- Income/Sales
- Cost of Goods Sold/Cost of Services
- Operating Expenses
- Other Income/Expense
- Net Income/Bottomline
B. Balance Sheet –a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time. It provide the basis for computing rates of return for investors.
The basic parts of a balance sheet
- Assets – things/properties a business owns that provide economic benefits.
- Liabilities – amounts a business owes, usually a sum of money
- Equity – the amount of company’s assets that the owner owns.
BALANCE SHEET EXAMPLES
ASSETS:
- Cash
- Accounts Receivable
- Inventory
- Prepaid Expenses
- Patents and Trademarks
- Fixed Assets
LIABILITIES:
- Accounts Payable
- Credit Card
- Taxes Payable
- Accrued Expenses
- Loans
- Notes payable
- Mortgages
EQUITY:
- Owner’s Equity
- Owner Capital
- Owner Drawings
- Owner Investment
- Owner’s Pay & Personal Expenses
- Retained Earnings
C. Cash Flow Report – a financial statement that captures how much cash is generated and utilized by a business in a specific time period.
The basic parts of a cash flow report
- Operating Activities – cash transactions from operations.
- Investing Activities – investments gain/loss. Common example: Purchase/Sale of Fixed Assets
- Financing Activities – cash flow from company funding, either thru debt/loans or owner investments/payments.
Two Cash Flow Report Methods:
- Indirect Method – calculates cash flow by adjusting net income with differences from non-cash transactions
- Direct Method – uses real cash inflows and outflows taken directly from company operations
SUPPORTING REPORTS:
- Profit and Loss Vertical Analysis – shows how Total Sales is getting divided, allotted or consumed by COGS items and Operating Expenses.
- A/R Aging Summary – shows how much receivables are getting overdue. You must avoid growing overdue amount.
- A/P Aging Summary – shows how much payables are getting overdue. Be sure to pay your overdues.
WHAT YOU SHOULD DO:
- Customize Reports
- Save reports for quick access
- Analyze & understand the reports
- Use at least the 3 basic management reports
- Take training/lessons to better understand the reports
- Use the reports to improve your business
- Review the reports at least on a monthly basis
NOTE: Don’t limit yourself to using only the profit and loss
KPI REPORTING:
KPI Reporting – facilitates the measurement and analysis of important business performance indicators.
Key performance indicators: Amount & Percentage
- Sales Trend
- Cost of Goods Sold/ Cost of Services trend
- Operating Expenses Trend
- Gross Profit Trend
- Net Income Trend
In this video series, I will share easy-to-follow, simple, and effective steps to setting up your books in QuickBooks Online!
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Ready to discuss some reports?