A business owner can only survive with good and current information. Outdated financial statements have very little value. You might receive your year-end financial statements in May of the following year and find that there is a decline in sales. Even if you can figure out what the problem is, you have allowed the problem to continue for at least five months longer than necessary.
Entering your company’s data into an accounting program is the best way to get a complete and accurate financial statement. You can get financial statements daily if you want. With a little help from your accountant, they can be more accurate than reports prepared by an outside bookkeeper. Outside help can often make incorrect assumptions. You know exactly why you wrote that check; you don't have to guess.
Budgets are critical for a company's success. Operating without a budget is like baking a cake with no recipe. You’re just mixing up a bunch of ingredients, putting the batter in a pan, and hoping it tastes good when you take it out of the oven. Don't just hope that you make money; plan to make money by carefully preparing a budget. Without a budget, it's difficult to monitor how you're doing and what adjustments need to be made. Your actual expenses should be compared to your budget every month.
Reconciling your checking account records to your bank statement is to make sure that both sets of records are in agreement. This is a critical step that all small business owners should learn how to do themselves. I have found that over half of small business owners do not know their bank balance. One of my clients saved at least $600 per week just by knowing their cash balance. You should take the time to review your checks to be sure that you know what all the checks are for. You should question any checks you don't remember writing. This will help you detect any theft within your company.
Product Sales Information
A good accounting program should allow you to track how your products or services are selling and allow you to create reports. These reports should answer questions like: Are some products not selling? Why not? Has the average price per product changed? If so, why?
Customer Sales Data
Knowing what customers are buying and if they have stopped buying from you is easy when you first start out. But as you grow, it becomes easier to overlook a customer taking their business elsewhere. A monthly report such as the Sales by Customer Summary will help you track this.
This report can also be used to help ensure you spend your time with your best customers. Most businesses get 80 percent of their profits from 20 percent of their customers. A good customer sales report helps you identify which customers deserve most of your attention.
Accounts Receivable Report
There are a couple of truths for every business. The sale isn't complete until the money is collected, and the older the receivable, the less likely you are to collect it. A good accounting system should be able to give you an A/R aging summary and a list of open invoices any time you need it.
Accounts Payable Data
It is amazing how many small businesses pay an invoice twice or end up paying penalties for paying their bills late. Having good payables records is necessary to prepare an accurate cash budget.
Preparing payroll by hand is an amazingly frustrating, complicated, and time-consuming exercise. A program like QuickBooks makes payroll preparation easy and accurate.