Financial Reporting Packages
Managing your company's accounting can be intimidating. As an owner, you desire to focus your time on growing your business, not on your books. Yet, at the Giersch Group, we find that timely accurate financial information is the foundation for excellent business management.
The bookkeeping the Giersch Group provides is both a product and a service. The service is Data Entry, adjusting entries, journal entries, bank reconciliations, bill pay and invoicing, payroll, and tax filing. The product is a monthly financial package that includes a beginning and end balance sheet, profit and loss statement, cash flows statement, and a simple dashboard. The product we offer also includes a quarterly package with your financials and some basic analysis. As well as an annual financial analysis, review, and planning session. Budgeting and financial modeling for an additional fee.
The purpose of the financial reporting package is to provide timely and accurate financial information to business owners, to ensure the integrity of the financial statements, to present a monthly package to review that includes Beginning and End Balance Sheet, Profit and Loss Statement, and Cash Flows Statement.
This paper outlines the ideal monthly reporting package for the average small business owner to utilize.
The Monthly Financial Reporting Package
A monthly financial report allows management to make timely decisions regarding the business, whereas quarterly or year-end statements do not allow management to correct the course quickly enough during the year.
The three fundamental financial statements every private company should utilize on a monthly basis are 1) Profit and Loss Statement, 2) Balance Sheet (Beginning and Ending), and 3) Cash Flow Statement. The Owner’s Equity Statement, showing changes in shareholders’ interests over time, is not necessary for a private company. For a deeper understanding of financial statements and how they work together to reflect business operations, please see the Resource section of the Giersch Group’s website.
Profit and Loss Statement: For the Profit and Loss Statement (P&L), it is useful to review the current month against Budget, Prior Month Actual, and Prior Year actual. These reports give a full perspective of the current business activity. Reviewing the P&L against budget allows us to see how we are doing compared to what was anticipated, and to make immediate decisions to change or improve financial results going forward. Comparing the P&L to the prior month, we see the trend of current circumstances. For example, is business up or down from the prior month. Comparing the prior year, we see the current month against the same time period. This is particularly useful in businesses. If July is always a slow month, and revenues are still up from the prior year, even if they are down from the prior month, we recognize that the business is doing well. It is also useful to look at the prior 12 months trend to get a larger perspective.
Within the P&L it is useful to have each line item as a percentage of sales. This helps to monitor whether items are increasing or decreasing overall. For example, if sales are decreasing then the expenses, particularly Cost of Goods Sold (COGS) should be decreasing as well. Of particular importance is monitoring the following percentages: COGS, Gross Margin, Total Expenses, and Net Profit.
Balance Sheet: In order to reconcile the validity of the Statements, a Beginning and Ending Balance Sheet must be produced. It is useful if these Balance Sheets can be on the same page to allow easy comparison. The inclusion of notes is also important. Of note should be that the cash was reconciled to the bank statement on a particular date.
Cash Flow Statement: Although the Cash Flow Statement is not utilized by many small businesses, it is critical to tying together the Balance Sheets and Profit and Loss Statement. This statement reflects what has taken place between the Beginning and Ending Balance Sheets. And since cash is king, it shows us exactly how much cash is available.
The Giersch Group provides you with the information you need in the format you need to run your company from the financials received at the end of every month.
