If you’re a business owner you’ll know the feeling of having to make a big decision and wishing that you had a crystal ball to know what’s going to give you the best outcome. Unfortunately, crystal balls don’t exist, but that doesn’t mean you have to make your decisions without any guidance, blindly hoping for a good outcome.
To make an informed decision that has a high chance of favourable outcomes you need information. More often than not in a business, that information will come from financials. Whether you’re looking at cost-benefit for expenses, investment viability, profit projections or operational efficiency you’ll need accurate and up-to-date financial reports to guide your decision making.
By having up to date figures you can make better, more informed decisions to:
- Increase sales
- Purchase new assets
- Reduce expenses
- Identify and pursue best revenue sources
- Continue or cease certain business activities
- Allocate human resources
- Invest in external services
And so much more. These decisions need to be made in reference to a few key financial reports to give you the most context for an educated decision. The key areas you should focus on having up-to-date at all times include:
Your balance sheet gives a summary of the financial balances of your business including all assets, equity and liabilities. To make informed decisions your balance sheet should always be up to date so you can easily assess your position at any given time.
Far too many business owners leave their finances and book balancing to the end of the month, or in many cases, not for a few months. Meaning your decision making is hampered and you’re forced to estimate your financial position. It’s essential to keep on top of your balance statement, and if you can’t manage it within your personal workload or team you need to invest in a professional bookkeeper to help.
Cash Flow Statement
Your cash flow statement should show the incoming and outgoing finances from operations, sales, investment and financing activities. Although the cash flow statement is often overlooked in reporting it gives you an accurate insight into how efficiently your business is operating from a financial perspective and is important in indicating your ability to generate cash internally when needed.
Your income statement – often referred to as a Profit and Loss statement – shows your revenue and expenses in a set period of time. Ideally, your income statement should be generated monthly to give you up to date figures you can use to track your yearly budget, and where you need to adjust for the upcoming months.
Are you making decisions according to these up-to-date reports? If not you’re putting your business at risk. Hiring an experienced bookkeeper is a great way to ensure all of your statements are up-to-date so you can get the information you need at any given time.
Plus if your bookkeeper is specialised in business growth like our team at Grow Advisory they can help guide you in your decision making so you can increase your profits, make informed financial decisions and grow your business.
Want to talk to us about how growth-focused bookkeeping can help drive your business?
Contact our team today to find out more.
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Disclaimer: The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant and/or financial adviser.