Simplify your financial reports

BALANCE sheets, budget analyses and business activity statements - the number of reports available to a small business can bamboozle its owner.

Tim Reed

BALANCE sheets, budget analyses and business activity statements - the number of reports available to a small business can bamboozle its owner.

But you don't have to be an accounting expert to stay in financial shape.

Focusing on three simple financial reports - cash flow, aged debtors and profit and loss - can give you much of the knowledge you need, says MYOB chief executive Tim Reed.

"A simple cash flow report will help you answer those questions that keep business owners awake at night - do you have enough money to pay your bills? Can you cover your next GST bill?" Reed says.

"Being aware of your situation means you can smooth out the cash flow bumps in your finances, putting money aside for the lean times or arranging temporary finance with your bank."

Reed says an aged debtors report instantly reveals who owes you money.

"This is a vital piece of information. It allows you to plan around when money is due to come in and it acts as a key indicator of any problems with payments," he says.

" For example, if a customer typically pays at the end of the month but their current bill has been outstanding for 60 days, it's time to follow them up."

The third key report, the monthly profit and loss report, provides a snapshot of the past month of trading.

"This is the best way to understand whether your business is making a profit, while keeping a close eye on important costs, particularly costs of sales," Reed says.

CPA Australia has a small business good practice checklist available to download on its website - cpaaustralia.com.au.

"Simply saying 'I don't understand - there's enough cash in the bank today' is a recipe for business failure," it says.

"A well-run business will help place your business in the best position to respond to whatever trading conditions you face."