Accounting and bookkeeping software is an immensely powerful tool that acts well beyond merely a database to collect your business’s accounting information. Learning how to organize that data correctly is what guides you in understanding your business’s financial story.
The thing is, there isn’t a single best way to organize the data. The software (and our favourite by far is QuickBooks) provides important and valuable information — some of which is more valuable to one business over another.
Types of QuickBooks reports
To determine which reports will answer your financial questions, let’s first take a look at the different type of QuickBooks reports.
Big picture reports. These are income statements, which provide details on income and expenses (and answer the big “Is my business profitable or is it losing money” question), and balance sheets, which subtract liabilities from assets to show how much a business is worth. This also includes cash flow reports, which helps business owners see the money going in and out.
Account balance reports. These include, among others, open invoice reports and account receivable aging reports both of which track the money coming into your business as well as unpaid balances from previous billing periods.
Account payable reports. There are a number of reports under this category, all of which allow businesses to track transactions with vendors.
Different reporting needs
While each report provides important and valuable information, what’s necessary to understand is that there isn’t a right or wrong one to view. What one business needs most to understand its financial health may not be what another business needs.
One business may need to carefully review a balance sheet to understand what is flowing in versus what is flowing out, whereas another business may need to remember to keep a close eye on account receivable aging reports to ensure that invoices are being paid. And yet another business may need to look at their income statement to see how changes (such as product or service discounts or hiring of seasonal staff) affect their bottom line.
Diving deeper into that last example, business owners who don’t run QuickBooks reports often have an idea in their head of how their business is doing financially. And that idea doesn’t necessary align with the reality of the numbers in the report. Discounts may be increasing sales but is there enough cash in the bank to pay the bills? Only QuickBooks reports can offer the definitive answer.
Successful businesses don’t run themselves. Setting up QuickBooks to generate the much-needed reports to understand your business is not something every business owner wants to devote time and energy towards. Reviewing the reports, yes; working out the fine details to direct the data to generate the necessary reports, no. That’s something we can do.
