Chapter 7

How to create monthly financial reports

There are dozens of financial reports that you could create. But there are some monthly mainstays that bookkeepers love.

A bookkeeper at a desk with a coffee cup and a laptop

What are financial reports?

These reports may be produced on a monthly basis to keep an eye on the financials.

Balance sheet / Statement of financial position

  • What it tracks: Value of things owned (including cash) versus things owed
  • What it tells you: If the business gained or lost value, and its current financial position

Profit and loss statement

  • What it tracks: Money earned vs money spent
  • What it tells you: If you had a profitable month or ran at a loss

Cash flow statement

  • What it tracks: How much cash the business earned
  • What it tells you: This is useful for businesses that sell things on credit because it shows how much spendable money you have.

Aged receivables

  • What it tracks: Who owes you, how much, and when it is (or was) due
  • What it tells you: Which accounts to chase

Aged payables

  • What it tracks: Who you owe, how much, and when it is (or was) due
  • What it tells you: Demands on your cash and any relationship risks you might be facing

Why does it matter?

Taken together, these reports tell you what your business is worth, how profitable it is, and if it has enough money coming in to keep trading.

The results can affect everything from your spending plans to pricing, forecasts, and customer payment terms. And, of course, the year-end versions of these reports show how much income tax you need to pay.

Who creates financial reports?

Monthly reports are traditionally created by a bookkeeper to help keep tabs on the business. The end-of-year reports tend to be created by an accountant, with a view to minimising tax and setting financial strategies for the year ahead.

How to create financial reports

If you were creating reports manually, here’s what you’d need to do.

  • Balance sheet: Summarise the activity from the assets, liabilities and equity accounts.
  • Profit and loss statement: Summarise activity from the income and expenses accounts.
  • Cash flow statement: Show how much actual cash was available throughout the period.
  • Aged receivables: Show which of your sales invoices have yet to be paid. For any that are overdue, show how many days you’ve been waiting.
  • Aged payables: Show which of your bills you are yet to pay. For any that are overdue, show how many days the supplier has been waiting.

Modern monthly financial reporting

Bookkeeping software has made it possible for anyone to generate these reports at the press of a button. However, you first need to make sure all the numbers have been entered, coded to the correct account, and reconciled.

Some of these reports can be shown on a live dashboard in real time, which updates every day.

The year-end reports are generally prepared by an accountant, who may make some final adjustments to ensure the business doesn’t pay more tax than required.

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

How to do bookkeeping

Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done.

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