Reporting

4 Most Important Accounting Reports for Your Small Business

Unsure how to manage your small business report accounting? Dive into this guide sharing four reports to create according to 34 experts.

Masooma Memon Masooma Memon on April 19, 2022 (last modified on April 11, 2022) • 13 minute read

No matter how good you’re at numbers and making mental notes, you can’t keep tabs on your cash flow without documenting important financial data.

Not to mention, creating accounting reports helps you share all the essential data with relevant folks such as stakeholders and your employees. Plus, all the data laid out in one place assists you in making informed financial decisions.

So, in this piece, we’ll dive into everything related to small business report accounting.

To this end, we’ve talked to 34 respondents – of which 52.94% come from B2C service/products businesses and 44.12% are from B2B service/product companies. The remaining 2.94% work in agencies (marketing, digital, or media).

A whopping majority, 91.18% of these folks, does accounting themselves, in-house.

Who manages accounting for small business?

So we asked them what are some of the best advice they can share with us. Here’s everything we’ll cover:

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What Are Small Business Accounting Reports?

Small business accounting reports are reports that curate a small business’s financial information in a readable document.

Their purpose? To keep small business owners, stakeholders, and others updated on the financial progress of the business – whether it’s tipping toward profit or loss, how much cash is flowing into business operations, and so on. 

Related: 9 Vital Small Business Financial Reports for Your Organization

How Do You Write a Business Accounting Report?

Clear, to the point, and easily readable small business accounting reports make the difference between accounting reports that are read and those that gather dust.

But how can you ensure your small business financial reports are helpful? Follow these tips:

Start with understanding who your target reader is.

A small business accounting report that’s meant to land on a stakeholder’s desk is different from one that employees read.

For example, the former carries in-depth information on the ins and outs of cash flow. So it’s important to first identify who your target reader is before preparing the report’s content.

Not only will this make it easier and more productive for you to manage small business report accounting, but it’ll make the report uber-relevant to its readers.

Related: Reporting Strategy for Multiple Audiences: 6 Tips for Getting Started

Gather all the information that’ll go into the report.

With it being clear who your target reader is, curate all the financial information that’s useful to them. This includes the percentage of sales, month-by-month income and expenditure, income tax information, and so on.

But instead of doing this from the scratch, have dashboards showing financial numbers ready ahead of time.

This way, you wouldn’t need to go deep into digging out numbers. Instead, you can quickly and effectively create accounting reports.

Related: Business Report: What is it & How to Write a Great One? (With Examples)

Visualize the data into easy-to-understand charts and graphs.

Presenting a noodle soup of accounting data is never readable. If anything, your reader may try to skim through and absorb some information.

But your message will never stick. What’s more, the report will fail its purpose, which is typically to help the reader make informed financial decisions.

So it’s important you create charts and graphs that are easily readable. To this end, make sure the chart type you select is easy to understand, the font type and size are both legible, and the colors you use are in good contrast with one another.

Related: How to Visualize Data: 6 Rules, Tips and Best Practices

Write your report – clearly divided into sections.

Finally, go ahead and write your report. Remember to begin with a brief executive summary (2-3 short paragraphs) that outlines the information covered in the accounting report.

Follow this with a body copy where you share your data-fueled charts and graphs. Make sure you’re using simple language and small to medium-length sentences. This makes reading easy.

And, finally, close the small business accounting report with a conclusion. This is where you analyze the data and/or present a set of recommendations for the future.  

Most Important Accounting Reports for Small Businesses

According to our contributors, the three most used accounting reports are:

  • Profit and loss statement/income statement that 91.18% create
  • ​​Cashflow Statement that 82.35% use
  • Balance sheet that 82.35% use
Most used accounting reports for SMBs

With that, let’s dive into the details of the four most important account reports that small businesses need to create:

  1. Profit and Loss (P&L) Statement
  2. Cashflow Statement
  3. Balance Sheet
  4. Cash Forecast

1. Profit and Loss (P&L) Statement

The income statement gives a complete overview of how the money’s flowing each month. A handful of respondents call this small business accounting report their most important financial report.

Take it from Eliana Levine of Find People Easy, for example. “This report tells me how much money my company makes, among other things.”

“I can quickly see how much money I make from business, how much money I make from advertising, how much money I spend on business travel, and how much money I spend on computer and internet charges by looking at my P&L,” Levine shares.

Katie Lyon from Allegiance Flag Supply echoes the same. “Not only does it tell us how much money we’re making each month, but it also gives us insight into where our money comes from, and where exactly we are spending it.”

“Our P&L has very detailed income and spending categories which allow us to tweak our finances as needed,” Lyon adds.  

“When we compare our current P&L to previous months or previous years, we’re able to see what’s working and what’s not. We’re then able to direct our focus to the most profitable parts of our business.”

The same is true for freelance businesses. Wave’s Juliana Casale confirms: “When I was running my own freelancing business, the Profit & Loss report was the most valuable to me. It not only let me see what I was making vs. what I was spending, but it also helped me identify where I should be charging more or reducing my expenses to hit my annual goals.”

Jonathan Zacks of GoReminders goes on to say that the P&L report is an essential guide to a business’s health that informs future finances-related decision-making.  

In Zacks’ words: “As a small business with relatively low turnover, we need to ensure that the business is operating at a sustainable level at all times. The P&L report allows us to see exactly what income is being generated and, possibly more importantly, what expenditure we have. Using this information we are best placed to make decisions regarding future investments or if necessary, where costs can be trimmed.”

PriceListo’s Admir Salcinovic also notes that the income statement is a reflection of how profitable a business is.

“The success or failure of a company depends on its capacity to keep expenses lower than the income at the end of a business year,” Salcinovic observes. “This is a major reason why creditors and investors take a keen interest in our income statement because it represents the profitability of our business in the coming years.”

“Revenues are usually the first to be outlined and it details the profit generated from activities like sales, services, and interest revenue,” explains Salcinovic.

“These revenues are accounted for every fiscal year. Expense accounts and balances incurred are the next to be outlined. Our expense accounts are structured into operating and non-operating expenses. Net income or losses are then calculated by subtracting earned revenues from the total expenses.”

In short, an income statement summarizes how much you’ve made and how much you’ve spent. This, in turn, gives insights into a small business’s health – how well it’s doing, how much profit it’s making, and how the expenses are distributed.

Lastly, all the information assists in setting future accounting objectives. For example, where to cut expenses, which marketing channels to focus on for driving more revenue, and so on.

2. Cashflow Statement

“The most important accounting report for a small business is the cash flow statement,” opines Claire Westbrook from LSAT Prep Hero.

According to Westbrook “The cash flow statement is important because it shows how much cash a business has generated and used over a specific period of time.”

So what makes this info important for small business report accounting? It helps aid better decision-making on how to allocate resources.

Sharing their experience, Westbrook writes: “For instance, there was a period when my business was seeing negative cash flow and I needed to make cuts in the budget to free up more cash.

Alternatively, there was also a time when my business had a positive cash flow, so I was able to invest in new opportunities and expand operations. Had I not pivoted the operations based on the cash flow statements, my business would have been in a weaker situation.”

Credit Donkey’s Ann Martin agrees. “For my purposes, a cash flow statement is the most effective type of report. Since my business is entirely online and I don’t have much in the way of concrete assets to keep track of, I’m much more interested in knowing where my money is coming from and where it’s going. How much am I spending on marketing? Research? Overhead? These are the things that are most relevant for me in my day-to-day.”

The takeaway? This accounting report breaks down cash flow as its name suggests. For example, how much is going into marketing and how much is coming from the same. Similarly, it answers how much you’ve invested in business tools.

All this information helps you plan your small business budget. It also assists in informing business strategies. For example, you may have invested heavily in paid social over a set timeframe. But the returns may not be good enough. Use the financial numbers to inform your next moves.

3. Balance Sheet

Essentially, “a balance sheet mainly contains bank accounts, accounts receivables, and investment accounts. It may also hold inventory of assets like the equipment for the business and other tangible property,” elaborates Find Me A Brewery’s Thomas Feeley.

In short, “It gives me a snapshot of what a business has and owes at any preferred time,” comments Madilyn Hill of Truepersonfinder.

“The assets mainly include things, such as accounts receivables, bank accounts, and mainly an investment account. Moreover, the balance sheet also has assets, such as computers, property, equipment, and other saleable intangible and physical property,” notes Hill.

A lot of respondents consider it their best small business accounting report.

Feeley, for example, thinks the balance sheet is the most important “because it entails the assets and debts of a small business.”

Talking about their business, in particular, Feeley says, “keeping a balance sheet account is very important as we need to know how to keep the business running and how to mobilize resources for future development.”

Dean Kaplan from Kaplan Collection Agency also relies on their small business balance sheet to access the company’s financial wellness.

“It keeps me and other stakeholders informed about our financial position. Most importantly, it should show we have more assets than liabilities, demonstrating a positive net worth.”

Adds Kaplan: “Our balance sheet [also] guides me to make better management decisions, improve our operational efficiency and review our borrowing. Potential investors will need to see our balance sheet to understand how their funding will be used and determine when they can see a return on their investment. Understanding the company balance sheet is a fundamental part of being a successful CEO.”

Similarly, Hill says, “While investigating the balance sheet, I look at the short-term assets vs. short-term liabilities. I used to have payments owed soon, and I didn’t want to run out of money without observing that my assets are liquid.”

In a nutshell, this small business accounting report is crucial for seeing the differences between the assets you own and your liabilities. It’s also a must for attracting investors.

4. Cash Forecast

Lastly, the cash forecast report “gives you a perfect account of how much cash you have at any given time and enables you to identify any significant acquisitions or payments due that may be outside the norm,” WinIt’s Ouriel Lemmel shares.

“In our case, looking at our cash forecast has helped us prepare for upcoming periods and ensures we have enough cash coming in to take care of the organization’s needs.”

Meaning: you need the cash forecast report to keep business expenses afloat. The data packed into it also informs acquisitions.

Best Accounting Software for Small Business

Now that you which reports you need for small business accounting, let’s look at which accounting software to use.

It turns out over 60% of our respondents use Quickbooks, which makes it the most popular small business accounting software.

Best accounting tools for SMBs

Stripe, Xero, and centralized dashboard tools are other software that you can use for accounting.

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Monitor Small Business Finances in Databox

To recap, the four main accounting reports that you need are your income statement (P&L statement), cashflow statement, balance sheet, and cash forecast.

Like the experts we talked to, you can manage your small business report accounting in-house using any accounting software that you prefer.

The best part? You don’t need to look at different places to gather all the data from your accounting software. Instead, use Databox to create a centralized dashboard that shows you all the important information on one screen.

For instance, if you’re using Quickbook for your small business accounting, integrate it with Databox. Then, grab a dashboard template or create a custom dashboard.

The result? You’ll see all the essential data – from your expenses broken down by category to a profit and loss overview, and a list of outstanding customer invoices – laid out on one dashboard.

The cherry on top: all the information is presented in a visually-engaging format. This makes the dashboard super easy to read and use for financial planning and decision-making.

So who’s ready to up their small business report accounting? Manage your accounting for free with Databox for free today.

About the author
Masooma Memon
Masooma Memon Masooma is a freelance writer for SaaS and a lover to-do lists. When she's not writing, she usually has her head buried in a business book or fantasy novel.
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