The Reports You Need To Succeed (And The Chat Your Accountant Has Zero Time For)

Have you ever felt like you're drowning in a sea of numbers, struggling to make sense of your business's financial reports? Do you wish your accountant had more time to guide you through the basics of understanding your own financial data (but there never seems to be the space in your meetings)?

You're not alone. 

I've heard this frustration time and time again from business owners like you. But have no fear, Liz is here! 😉

Business ownership is one of those funny things - much like parenting - like we’re waiting on some universal ‘download’ of all the things we need to know to be successful. When in reality there’s a lot of trial, A LOT of error and the feeling of fumbling around in the dark. 

It doesn’t have to be this way.

I want to walk you through the back-to-basics, 101-level reports I want you to get super comfy and super familiar with. Once you can wrap your head around them (which is easier than you think) this process will allow you to review your finances in a clear, concise and confident manner.

Keep in mind as we go: accounting doesn’t HAVE to be complicated. The numbers you’re about to dive into are simply a reflection of a business you know like the back of your hand. 

Before we dive in:

Not to cause you to stumble at the first hurdle, but as you read through the following points I need you to keep one thing in mind: there is a very good chance your financial data is wrong. Which completely destabilises everything I cover in this article.

That is ABSOLUTELY NOT to say that you are a failure, that your bookkeeper is a slacker or that your accountant is deceiving you. It is more the case that the three of you are all equally suffering from:

👉 Lack of time

👉 Overwhelm and confusion

👉 Isn’t-that-supposed-to-be-your-job-itis

Between an over-regulated accounting space and misplaced priorities (i.e. ATO often eats first now), it’s not the players who should be blamed, it’s the game. Which inevitably leads to incorrect data and poorly organised transactions that pushes your priorities to the back of the line. 

But here’s the silver lining: you’re about to find out all the rich information that could be at your fingertips once you get your house in order (which, by no coincidence, I can also help you with - read on!)

Image courtesy of Unsplash:

Profit and Loss Statement (P&L)

The Profit and Loss Statement (P&L) serves as your business's financial compass, offering crucial insights into its performance over a specific period:

  • Revenue, your lifeblood, reflects total income from sales, revealing sales trends and patterns. 
  • Expenses encompass necessary costs like rent, utilities, and marketing, guiding you to identify overspending areas and cost-saving opportunities. 
  • Then there's net profit, the ultimate measure of profitability. Positive net profit signifies business success, while negative indicates trouble.

Yet, the P&L is more than numbers; it's a narrative of your business's journey. 

It uncovers operational insights, customer behaviors, and market trends. With this knowledge, informed decisions drive growth and maximize profitability. So, when you review your P&L, recognize it as more than a report – it's a powerful tool guiding you toward financial success.

Image courtesy of Unsplash:

Chart of Accounts

The Chart of Accounts is like the DNA of your business's financial system – it's the blueprint that organizes and categorizes every financial transaction.

In simple terms, it's a comprehensive list of accounts, each with its own unique code or number for easy identification. These accounts cover everything from assets and liabilities to equity, revenue, and expenses.

  • Assets, like cash and inventory, are what your business owns
  • Liabilities, such as accounts payable, represent what it owes. 
  • Equity reflects your investment in the business
  • Revenue tracks the money coming in from sales and services. 
  • Expenses cover the costs of running your business, from rent to salaries.

But here's the kicker – the Chart of Accounts is completely customizable to your business's needs. If something feels off or incorrect, don't fret! You have the power to tweak and tailor it to fit your unique circumstances.

An important side note here: Sometimes, you might notice discrepancies in your financial reports. This could be due to your bookkeeper incorrectly categorizing transactions. Perhaps they're unsure about 'what goes where' or lack clarity on your business's specific needs.

In such cases, clear communication is key. Provide your bookkeeper with guidance and instructions to ensure accurate categorization and reporting. By fostering open communication and clarity, you'll maintain the integrity of your financial records and keep your business on the path to success.

Image courtesy of Unsplash:

Balance Sheet

It's your business's financial snapshot, frozen in time. This report offers a concise overview of your assets, liabilities, and equity at a specific moment, providing essential insights into your financial health and solvency. Like a photograph of your business on any given day. 

Why is it crucial? Well, it's like a financial check-up. If your assets exceed your liabilities, it indicates a healthy financial position. Conversely, if liabilities outweigh assets, it signals potential financial strain.

So, when you review your Balance Sheet, focus on these key elements to understand your business's financial standing and make informed decisions for future growth and stability.

Image courtesy of Unsplash:

Key Performance Indicators (KPIs)

These provide valuable insights into your business's performance, allowing you to identify strengths, weaknesses, and areas for improvement. By tracking these metrics regularly, you can make informed decisions and steer your business towards greater success:

  • Gross profit margin – a crucial indicator of your business's profitability. It measures the percentage of revenue that exceeds the cost of goods sold, revealing how efficiently your business is generating profit.
  • Return on investment (ROI) – the golden ticket to measuring the success of your investments. Whether it's a marketing campaign or a new product launch, ROI tells you if your efforts are paying off and where to focus your resources for maximum impact.
  • Customer acquisition cost (CAC) – a vital metric for assessing the efficiency of your marketing and sales efforts. It calculates the cost of acquiring a new customer, helping you determine the effectiveness of your marketing strategies and optimize your budget allocation.

So, take the time to identify and track KPIs that are relevant to your business. Whether it's monitoring your gross profit margin, ROI, or CAC, these metrics will serve as your guiding light on the path to business success.

So, what does all this look like in YOUR business?

Now that you have a better understanding of the theory, how do you put it into practice?

This will look different to every business owner, whether you’re a seasoned entrepreneur or just starting out. And I know I’m preaching to the converted when I say that sometimes, you just need someone in the trenches with you, making sure you put one foot in front of the other. 

That’s where I come in. 

Book a Financial Power Hour with me, and let's dive deep into your business's unique financial landscape. During our one-on-one session, we'll unpack your financial reports, discuss key metrics, and identify opportunities for growth and optimization. From understanding your profit and loss statement to deciphering your balance sheet, I'll provide clarity and guidance every step of the way.

Remember, every business is unique, and your financial data will look different from others. That's why a tailored approach is essential. Together, we'll create a roadmap for financial success that aligns with your goals and aspirations.

So, don't let uncertainty hold you back. Take the first step towards financial empowerment by booking your Financial Power Hour today 👉 Book Now

Let's unlock the potential of your business's financial future – together.

Disclaimer: These are yuck and boring but unfortunately a legal requirement for professionals in my industry. So just a reminder, the information contained here is general in nature and you should seek financial and business advice tailored to your own personal circumstances. Which, by no small coincidence, I can help you out with. Head over to my website and book a free 15 minute chat with me:

Take Control of Your Business Profitability

Book a judgement-free strategy session that will provide you with clarity.
No change in accountant or bookkeeper is required.
Book a free strategy session