Money makes the world go round, including your business operations. Given the crucial role of finances in your company’s success, it's critical to be responsible for your money. When dealing with your organisation’s financial matters, you must remember to have essential bookkeeping reports!
Simply hiring an accountant for your online business isn't enough—you must also have access to the necessary bookkeeping reports. Suppose you are interested in keeping your business' finances in order. In that case, you must manage your business' bookkeeping records.
By keeping the necessary bookkeeping reports, you can make sure your finances are in order, helping you determine how well your company is doing financial-wise!
Here are the bookkeeping reports you must have:
1. Balance Sheet
The Balance Sheet is an overall financial snapshot of your organisation. This bookkeeping report is the most important of the bookkeeping reports because it gives you an idea of how your company is currently operating.
The Balance Sheet gives you an idea of how much cash you have on hand, how much debt you have, how much your company is worth, and how much your business has gained or lost over the past accounting period. It also indicates if you have enough available assets to pay your business’ debts.
2. Profit and Loss
Also known as the P&L, this is a record of the income and expenses incurred in a specific period. It's also one of the most critical bookkeeping reports because it contains financial data to determine your company's profitability.
The P&L report divides all your expenses into direct and indirect expenses. Direct expenses can be easily identified or traced, e.g. salaries, service fees, etc. Indirect expenses are those that can't be easily identified or traced, e.g. maintenance and other fees.
3. Cash Flow Forecast
A Cash Flow Forecast is an estimated prediction of your company’s cash flow for a given period. The period can be a week, a month, a quarter, or a year. By having access to this bookkeeping report, you can determine how your business will fare financially in the following few periods.
4. Inventory Forecast
Inventory is an item or service that you plan on selling to your customers. It's also one of the essential bookkeeping reports you must have because it can help you determine the proper inventory levels for your business.
To have an accurate inventory forecast, you need to know your company's average inventory turnover. This means you should know the average time it takes your company to sell the products in its inventory.
If you have this information and can estimate future inventory turnover, you can create an inventory forecast that will enable you to plan your company's financial activities accordingly.
Conclusion
Managing your business' finances is a lot like driving a car in the middle of a fast-moving highway with no speed limit—it's easy to get carried away! The key is to be responsible.
Remember, you are the driver of your business, so you should always think about your company’s safety before speeding ahead. Make sure to work with a competent accountant for your e-commerce business so that you can safely get through the bookkeeping reports!
If you’re having trouble managing your business’s finances, let an accountant for e-commerce businesses help you! Here at The ECommerce Accountant, we meet with our clients regularly to run through their figures and ensure they have a strong understanding of how their business is tracking. Book a free strategy session today!