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Financial Statements

To get a good understanding of the financial performance of your business it is important to produce accurate and timely management accounts.

There are three prime financial statements that will give a good overview of the financial positon of your business. However, invariably there needs to be a comprehensive management accounts pack which will enable the user to drill down into more detail where required.

1) The profit and loss account is a financial statement covering a period of time which is usually monthly or yearly. At the top of the statement you will see the turnover or sales of the business. If there are any direct costs in achieving those sales they are normally deducted to show the gross profit of the business. All the other overheads of the business are included below the gross profit. These include such things as salary costs, rent and rates, advertising and marketing, professional fees, insurance, telephone, postage, travel, depreication etc. After all these costs have been deducted from the gross profit then the result will be either a profit or loss.

2) The balance sheet is a financial statement at a specific point in time, normally the end of the month or the end of the year. The balance sheet is a statement of the assets and liabilites of the business. The balance sheet is made up of two parts, the totals of each will always be equal. One part shows the net assets of the business, where the money has been invested in such things as fixed assets, stock, bank, accounts recievable and the liabilities of the business such as accounts payable and  taxation. The other part shows the sources of finance for the business such as share or loan capital or owners funding plus reserves. The reserves are the profits the business has made since it commenced trading.

3) The cashflow statement is a financial statement that shows the cash inflows and outflows of the business over a given period of time, normally monthly.

Many other reports are available some of the more popular reports include sales and margin analaysis, overhead analysis, aged accounts receivable, aged accounts payable, payroll analysis and ratios.


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