Financial Reports: Insight for your Business

Some of us are finding ourselves with an abundance of time on our hands with all the changes that have been made recently. You may be able to use this time to perform a financial report for your business. Planning for the future now may allow you to hit the pavement running when shows and stores are open. Plus, although many financial decisions may still be up in the air, you can focus on auditing your own accounts. As a business owner, reflecting on past revenue and future projections is one method of determining how well your business is performing and what changes you need to make.

How to Set Up A Financial Report

Your basic report can be performed using software such as Quickbooks or Wave or on a spreadsheet with programs such as Excel. For many of us, digital records will be easier to track, file, and store. Available software could be downloadable or cloud-based and can offer a range of features depending on what you are looking for. Each software company offers different features and benefits, so it is important to determine which might be most useful for your business and current situation. Alternatively, if you’d prefer to use a spreadsheet, there are many financial report examples online. We can help you get one set up too.

A financial report may include the following: 

• Income Statement 

• Profit and Loss Statement

• Cost of Goods Sold

• Gross Profit

• Gross Margin

• Other factors you would like to track

In this blog we will look at the Profit and Loss Statement and Cost of Goods Sold.

Profit and Loss Statement

Your basic financial report should primarily include a profit and loss statement. This summarizes your income, costs, and expenses. Tracking these across each quarter at the least is recommended and then again over a 12-month period. In an unstable gig market, you may be wanting to do this monthly. A profit and loss statement can be used in order to compare company revenue or operating costs over time and can be used in conjunction with other documents to demonstrate a company’s overall financial performance.

The factors analyzed on your profit and loss statement could include: 

• Sales and revenue

• Operating expenses

• Pre-tax profit

• Other financial factors you feel are important to include

Cost of Goods Sold

Another aspect of your financial report should highlight the Cost of Goods Sold (COGS). This refers to the direct cost of the acquiring or production for goods sold, including labor and materials, over a given period. As the name suggests, it only accounts for goods sold, so inventory that is unsold does not count in this column. Furthermore, it is not associated with broader overheads such as marketing, sales, and distribution costs, which is a common mistake that business owners make. These factors should actually be excluded from the COGS column. 

This is an important measure to determine gross profit and gross margin, which might also appear in a financial report. It effectively shows the value that you add to the initial materials. It can also give insight into factors such as profit margin, which is the amount by which income exceeds expenses.

Although there are several accepted formulas for COGS, this is most predominantly used:

Importance of Financial Reporting

Checking in on your business finances each quarter or year is useful for tracking, planning, and forecasting. Even in uncertain periods, financial reports provide transparency for a company, and can also provide insight into tax liability. Regular financial reports reduce the window of error and can help companies maximize their efficiency. If you’d like help with performing a financial report, schedule a chat here.