I really wanted to give you information to help you day-to-day, week-to-week and month-to-month, so you can monitor and make sense of your financial results. \u00a0But whichever way I look\u00a0at it I find it difficult to provide you with the complete \u2018know how\u2019 in a simple accounting101 blog post.<\/p>\n
Making sense of your financial data is pretty much what we do\u00a0as accountants and we\u2019ve\u00a0been specially trained over many years to build up the knowledge needed. I believe I\u2019d be doing you a great disservice if I tried to explain that in a simple blog post.\u00a0 We use many different ratios to extract meaning from your data and they are really only useful when you can assess them with a strong accounting background.<\/p>\n
However, I\u00a0can<\/em>\u00a0provide you with the steps you can take to make sense of your financial results.<\/p>\n You\u2019ve heard the statement \u2018garbage in, garbage out\u2019, well that is the system you create unless you make sure that all the data you capture in your bookkeeping software is accurately entered.\u00a0 The best way to overcome this is to use a qualified bookkeeper that works in closely with your accountant, even better is working with a bookkeeper that is recommended by another business owner or your accountant!\u00a0 If you are unsure of the quality of your bookkeeping perhaps have your accountant have a look over it and give you some feedback.\u00a0 It is better to know earlier than later if there are problems.<\/p>\n Common bookkeeping mistakes:<\/strong><\/p>\n <\/p>\n Reconciling your accounting software with your bank accounts allows you to pick up errors, duplications and\/or emissions.\u00a0 If you leave this too long it becomes more difficult to find errors and can take longer to reconcile overall.\u00a0 You will also be flying financially blind.<\/p>\n All of your bookkeeping software will have a reconciliation function.\u00a0 Some make it super simple.\u00a0 Of course things can get tricky.\u00a0 If you are not a bookkeeper or accountant make sure you get advice on how to proceed rather than winging it.\u00a0 Issues that come back and bite generally come back and bite in a time consuming and expensive way.<\/p>\n When you have accurate data to rely on and regular reconciliations occurring, you, as the business owner, can start to extract reports regularly and review your results.\u00a0 Your most common financial reports that you should be reviewing regularly include the profit and loss statement, balance sheet and cash flow statement.<\/p>\n Profit and loss statement<\/strong><\/p>\n A profit and loss statement, also known as a statement of financial performance or an income statement, measures the profit and loss of a business over time.\u00a0 It reflects the past performance of a business over a month, quarter or a year.\u00a0 The statement subtracts the expenses from income incurred during the period and provides the overall figure of profit or loss for the business at the end of that period.<\/p>\n Balance sheet<\/strong><\/p>\n A balance sheet, also known as a statement of financial position, provides the value of a business at a particular point in time.\u00a0 The statement includes the value of what the business owns (assets) and owes (liabilities) and provides the difference as the value of the owner\u2019s equity (or net worth of the business) at a specific point in time.<\/p>\n The balance sheet is often used to report financial position to banks and investors.\u00a0 It is also to determine liquidity of a business.<\/p>\n Cash flow statement<\/strong><\/p>\n This statement focuses on the sources and uses of cash through operating, investing and financing activities.\u00a0 It does not include any future incoming or outgoing cash, unlike the profit and loss and balance sheets that also include sales made on credit.<\/p>\n This statement provides an overview of where money is coming from and how it is being spent.<\/p>\n Are you regularly reviewing these financial reports?\u00a0 Do you understand what they mean for your business?<\/p>\n So not only do you need to have your accounting software to capture what has happened, you also need to forecast what you hope to achieve.\u00a0 Unfortunately it is still a bit of a rare occurrence for small businesses to have their financial plan and business plans, or a forecasting component of their accounting software up to date, but it is necessary.\u00a0 How can you get where you want to go if you don\u2019t have the know-how to get there?<\/p>\n Check your actuals from step 3 against your forecasted figures.\u00a0 How did you go versus how you thought you would go?\u00a0<\/strong><\/p>\n The analysis and decision making you do on your financial data needs to be\u00a0100% correct<\/strong>\u00a0otherwise you could be leading yourself and your business off a cliff.<\/p>\n We love numbers and we are specially trained to make good sense of them.\u00a0 I\u2019ve also had over 20 years experience providing financial advice as a commercial and public practice accountant and building businesses in the finance, imports, food and beverage and leisure industries.\u00a0 Making sense of numbers and relating that to the real business world is my specialty.<\/p>\n As much as I\u2019d love to give you the tips and tricks to help you make sense of your figures yourself I\u2019m not confident that would put you on the best path.\u00a0 But catching up with you monthly or quarterly I\u2019d have 100% confidence that I can put you on the right track.<\/p>\n If you are a new client why not take us up on our free 30-minute consultation?\u00a0 If you are a current client just give us a call or send us an email to review your options.\u00a0\u00a0 Love to see what we can do to help you move forward with confidence.<\/p>\n","protected":false},"excerpt":{"rendered":" I really wanted to give you information to help you day-to-day, week-to-week and month-to-month, so you can monitor and make sense of your financial results. \u00a0But whichever way I look\u00a0at it I find it difficult to provide you with the complete \u2018know how\u2019 in a simple accounting101 blog post. Making sense of your financial dataRead More \u00bb<\/a><\/p>\n","protected":false},"author":1,"featured_media":41,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":"","spay_email":"","footnotes":""},"categories":[26],"tags":[],"class_list":["post-40","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-tip"],"jetpack_featured_media_url":"https:\/\/www.trakaccountants.com.au\/blog\/wp-content\/uploads\/2017\/03\/Dollarphotoclub_59010204-copy.jpg","_links":{"self":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/40","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/comments?post=40"}],"version-history":[{"count":1,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/40\/revisions"}],"predecessor-version":[{"id":42,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/40\/revisions\/42"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/media\/41"}],"wp:attachment":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/media?parent=40"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/categories?post=40"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/tags?post=40"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Step 1 | Capture data effectively<\/strong><\/h2>\n
\n
Step 2 | Reconcile and check captured data accurately and regularly<\/h2>\n
Step 3 | Read and understand what historical data means<\/h2>\n
Step 4 | Compare your actuals with your forecasting system and understand what happened and what is going to happen in the future<\/h2>\n