3 Things Your Bookkeeper Knows Better About Your Business
Updated: May 24, 2021
Your business is a complex web of transactions aiming to achieve specific goals. As a business owner, you are expected to be well-rounded on the ins and outs of your company. It is not enough that you understand your products and services and offer them to your customers. The learning doesn't stop there. In fact, there are a lot more that you should be aware of–things that a bookkeeper knows better.
When it comes to the accounting part of any business, there is a lot of information hiding behind the journals and workbooks where transactions are recorded. Your financial statements, for example, can be a great tool to understand your business's current situation and how you can make excellent decisions on improving it. Our accountants in the Gold Coast will help you analyse three of the things most business owners are not fully aware of.
Cash Flow Statement
As a business owner, you might be familiar with your cash flow statement, along with the profit and loss statement. This financial statement shows how the changes in your income and balance sheet accounts impact your business' access to cash. Looking at the cash flow statement result, you will have a clear understanding of how your business can pay your expenses, such as salary and utility expenses.
Here's another report that some business owners do not give ample attention to. Profitability ratios show how your business is performing in terms of generating money. What are the sources of your income? It's different from your cash flow statement because it does not reveal how much on-hand cash you have. Instead, profitability ratios indicate how your income can exceed your expenses and how excellent your business is making money.
There are various helpful profitability ratios in your business. These include return on assets, profit margin and return on equity. One way to understand how your business is generating income is by comparing your profitability ratios to your top competitors. Be mindful of your income's annual growth. Your business' yearly profitability ratios will give you an idea of what changes you can make to improve your business’s profits.
A very important yet least understood is the burn rate of your business. You might be wondering how it is different from the other financial reports and what role it does play for the business.
Simply defined, burn rate refers to the figure that presents how much money is spent each month. Upon evaluating this figure compared to the cash amount that your business has, you will be informed how long your company can stay in business. In some cases, this dictates if you will need to start creating more profit or look for another source of cash like loans and venture capitalists.
As a business owner, you must see the numbers and evaluate how they are either making or breaking your company. Analysing the various financial reports, such as balance sheets, income statements, profit and loss statements and others, can be daunting and complicated. This is where the help of professional accountants is needed. There are also online accounting services, along with financial controllers and bookkeepers, which can help you make smart decisions for your business to succeed.
If you need to scale and grow your business, Gold Coast accounting firms are here to assist. At New Wave Accounting, we help you understand your financial reports and create tailored solutions so that your business will continue to stand out in the industry. Contact us today!