When it comes to financial reports, all that business owners want is to look at the numbers before them and know how everything's going. They want to know that they’re hitting revenue targets, keeping costs in check, and maintaining profit margins.
However, making sense of financial reports to gain insights—understanding how the business is performing, where the risks lie and what the future holds—continues to be an area of struggle for many business owners. Here are 3 very real reasons why.
1. Your books are a mess, and your reports reflect that chaos leaving you overwhelmed
On any given day, a business is dealing with transactions galore: be it bank transactions, credit cards, loan repayments, payroll activity, inventory bills, vendor payments, and so on.
While volume isn’t an issue, the timing of transactions can be.
Sometimes, a sale is recorded before payment arrives; supplier bills are recorded before they're paid. Other times, receipts, invoices and supplier bills get lost or submitted late, leaving transactions unexplained.
What’s more, the accounting software may not integrate seamlessly with the CRM, inventory and payroll software and other tools, requiring manual input for consolidation.
This can lead duplicate entries, incorrect entries, or miscategorised expenses: all of which can create discrepancies in reports.
Suddenly, trying to match transactions, finding missing information, and tracing errors in reports turns into a mission, overwhelming owners already juggling multiple priorities.
And the longer it’s put off, the harder it can be to eventually untangle.
What is needed? Who can help?
This is exactly why reconciling accounts is an art. Complex cases require bookkeeping accountants with highly developed skills, including in double entry accounting, as well as a trained eye and communication skills to work with busy owners and department heads to find the missing pieces when cleaning up the books.
Clean books are the first step to building helpful, functional financial reports.
Related: How to get the Most out of your Accountant
2. Your books are reconciled but your reports focus on the wrong thing giving you little to no insight
Every accounting software promises customisable, industry specific templates. But without advice on customising these reports to suit the needs of your business, you can end up with P&L statements and balance sheets featuring line items that have no relevance to you.
For instance, if your report hasn’t been set up to show, say, the gross profit at a job level, it denies you as a business owner the opportunity to make service delivery more efficient or price jobs better.
Another common scenario is when reports don’t reflect complex company structures. For example, in a multi-entity company, several of Company B’s operational expenses may be recorded in Company A’s accounts instead. So, one may look at its reports and think Company B is really profitable, but that’s because a lot of its costs aren’t captured.
If your reports are only set up to tell you half-truths, you’re still no closer to seeing how your business is actually performing—despite having access to good data from clean books.
What is needed? Who can help?
Good bookkeeping accountants can help create a holistic view of your business by bringing together all your entities into one place. Based on their assessment of your needs and priorities, they can also help format your reports to surface the data points most meaningful to you.
This can include things like:
• categorising revenue into different streams—industry, region, etc.
• mapping costs against revenue to show gross profits
• tracking marketing expenses to show the cost of generating new business
• setting up a rolling month-to-month view of true operating costs
• setting budgets and tracking performance against budget
• creating a real-time picture of cash position
This is essential for business owners serious about taking control of their business whether that’s for charting growth or steering it out of troubled waters.
Related: How to Transition from In-House Accounting to Outsourced Accounting?
3. Your reports are just numbers in isolation that don’t offer any real insight
Because financial reports are produced to meet accounting and tax obligations, most are really just numbers in isolation. Business owners frequently feel like they’re missing much-needed context behind all the data.
Benchmarks, comparisons against budgets, and explanations of what's driving changes—can all be helpful for decision makers—but not always easy to glean from reports.
What’s needed? Who can help?
This is where the value of working with of a good bookkeeping accountant really becomes apparent.
They can help analyse changes in revenue, costs and margins; identify areas of overspending or underperformance; and highlight trends that could affect profitability and cash flow.
By comparing actual results against budgets, performance in previous periods and against industry benchmarks, they can help you see where you stand currently, whether you're on track to meet your goals, where corrective action may be needed, and whether you have the financial capacity to invest in growth.
These are just some of the questions that they can help you answer:
• Which products, services or customers generate the strongest margins, and where rising costs are eating into profitability.
• How quickly your customers pay you, where cash is tied up, and whether the business can comfortably cover upcoming expenses or fund expansion.
• Where revenue or expenses deviated from forecasts and why, whether the business is on track to meet its targets, and where adjustments may be needed.
The last word on financial reporting
Financial reports need to be viewed as strategic planning tools; not just as performance records and compliance documents.
We believe more businesses should prioritise getting their books in order and maintaining them.
Every business owner can benefit from learning how to use reporting tools well and turn running and interpreting financial reports into a strategic advantage.
Related: A Guide to Outsourcing your Accounting and Payroll
This article is intended to provide general information only, and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances, and assumptions, and its accuracy may be affected by changes in laws, regulations, or market conditions. Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.