Solving your payroll and HR issues with insights, answers, and action.

  • Startup
  • Payroll/Taxes
  • Human Resources
  • Employee Benefits
  • Business Insurance
  • Compliance
  • Marketing
  • Funding
  • Accounting
  • Management
  • Finance
  • Payment Processing
  • Taxes
  • Overtime
  • Outsourcing
  • Time & Attendance
  • Analytics
  • PEO
  • Outsourcing
  • HCM
  • Hiring
  • Onboarding
  • Recruiting
  • Retirement
  • Group Health
  • Individual Insurance
  • Health Care
  • Employment Law
  • Tax Reform
Thumbnail

Monthly Financial Reporting May Prevent Small Issues from Becoming a Big One

Finance
Article
12/02/2015

Time constraints and a lack of resources can cause a small company to struggle with maintaining a monthly financial reporting process. Yet by staying on top of the company's financial performance, minor issues may be identified and taken care of before they turn into major problems. Online accounting software may provide a close look into that performance by allowing businesses to efficiently set up and prepare reports with the press of a button. Here are a few examples of reports that management should review on a monthly basis.

A/R Aging

The accounts receivable aging report details which customers currently have outstanding balances. Receivables are segregated into aged buckets, highlighting past-due amounts in need of collection procedures. If invoices are prepared using a cloud accounting system, the A/R Aging report can be produced easily at month end. The basic format can also be customized to show receivables by customer, by date, or by project, whichever is preferred.

A/P Outstanding

The A/P outstanding report should also be checked each month for accuracy and completeness. All invoices should be paid prior to the due date specified to ensure that bills do not go unpaid, which may result in late fees, interest expense, or credit reporting issues. A/P can also be tracked by vendor, by project, or even by date for analytical purposes.

Monthly Expenses vs. Budget

Companies set income and expense targets based on assumptions such as employee count or revenue growth. Setting a budget is a time consuming exercise, but one that can provide value by helping to keep a company on track throughout the year. For this reason, expenses should be reviewed each month in comparison to the initial budget. A budget-to-actual report can be prepared using the expense totals captured in a cloud accounting system. If expenses begin to outpace the anticipated budget growth, follow-up research can be initiated and spending can be reined-in to help ensure year-end income targets will be achieved.

Cash Flows Statement

No company wants to experience an unexpected cash crunch. For those startups highly dependent on liquidity, frequent monitoring of the cash balance is essential. Monthly bank reconciliations validate cash balances and business activity, which can be compared to a cash forecast. Inflows and outflows should approximate expected amounts and any differences should be investigated.

Net Income Statement

Once all monthly transactions have been entered into a cloud accounting system, an income statement may be compiled and reviewed. Cash flows keep a company going, but in the end, the primary objective is to produce income and invest in future growth. If a company does not earn money, or falls short of monthly forecasts, an analysis of the income statement can determine the reasons behind a shortfall. Internal and external factors affecting the business plan may also be identified, such as a shift in customer preferences, interest rate movement, or operational breakdowns. Once the causes of any issues are found, adjustments can be made going forward.

Each individual company determines which financial reports will best assist management in making crucial decisions. Using online accounting software as a starting point, financial reporting can be customized in to a format that's easy to understand and adds value, not just to the accounting process, but to the overall operation of the business.

 

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
View More in FinanceView All Categories