3 Essential Bookkeeping Reports for Your Business

As a business owner, staying on top of your finances can often feel like an overwhelming task. However, setting aside regular time each month to review critical financial reports can not only help you catch potential problems early but also reveal growth opportunities and support better decision-making. Let's explore three core bookkeeping reports you should be reading each month.

Income Statement (Profit and Loss Statement)

The income statement is a summary of your business's income and expenses over a specific time period. This report is critical for revealing profitability and cost control, as well as aiding in budgeting and investment decisions. Pay attention to issues such as decreasing profit margins, sudden unexplained rises in operating expenses, or losses despite steady sales—these could be signs of underpricing or excessively high overhead costs.

Balance Sheet

The balance sheet provides a snapshot of your assets, liabilities, and equity at a given moment. It's an essential tool for assessing your business's financial stability and making informed choices about growth or risk. Be wary of red flags such as a shrinking cash balance with unclear causes, rising debt without corresponding income growth, or negative or shrinking owner equity, all of which could indicate financial distress.

Accounts Receivable Aging Report

This report breaks down unpaid invoices by how long they've been outstanding, supporting a healthy cash flow by highlighting payment delays. Watch out for an increasing number of late payments in the 60–90+ day range and heavy reliance on a single customer with overdue invoices, both of which could place your cash flow at risk.

Taking charge of your business's financial health through consistent report review is imperative. Act early on red flags and recognize trends that can affect your growth. If you need assistance with bookkeeping or have questions about payroll, don’t hesitate to contact us. We're here to help support your financial journey.