A question I commonly hear is what reports should I use for my businesses and investments? I have several customized reports I use, but today, I'm going to share the 3 standard reports I use - these are reports that can be pulled from my accounting software. I use QuickBooks but these reports are standard in all accounting software packages.
A question I commonly hear is what reports should I use for my businesses and investments? I have several customized reports I use, but today, I'm going to share the 3 standard reports I use - these are reports that can be pulled from my accounting software. I use QuickBooks but these reports are standard in all accounting software packages.
- Report #1: Statement of Cash Flows -
Where does my cash go?
Does this question sound familiar? Many business owners and investors are constantly trying to answer this question as they scramble to make payroll or mortgage payments.
Whether it's your business, your rental properties or your option trading, the Statement of Cash Flows report tells you exactly where your cash goes.
I like this report because it gives me a ton of information in one shot. It tells:
- My cash balance as of the start date of the report
- My cash balance as of the end date of the report
- My net income or loss for the period of time being reported
- How much cash went in and out from my normal operations
- How much cash went in and out from my investing activities
- How much cash went in and out from my financing activities
Here is an example of how the Statement of Cash Flows report helps me analyze my rental property investments.
When I pull a Profit & Loss report (also called an Income Statement) for my rental property investments, I see a net loss of $10,000. This loss information is helpful in my tax planning but not when I'm trying to assess how my properties are performing.
The net loss is due to large depreciation deductions, which are non-cash deductions, claimed on my rental properties. So, I have to pick apart the Profit & Loss report to figure out if my net cash flow from the property is positive or negative. While I want the information, I don't want to spend a lot of time digging for it. This is why I l love the Statement of Cash Flows report - it does the work for me!
The Statement of Cash Flows starts with the net loss from the Profit & Loss report and makes all the non-cash adjustments for me. For example, it adds back depreciation. It factors in cash spent buying a new property (which isn't on the Profit & Loss report because it's an asset that gets reported on the Balance Sheet). And it shows the cash I spent to pay down the principal on my mortgages. (Remember that if your mortgage payment includes principal and interest, then the interest portion is included in the Profit & Loss report but the principal portion is not).
The Statement of Cash Flows answers the nagging question - where does my cash go!
- Report #2: Accounts Receivable Report -
As a business owner, I want to know who owes me money! I use this report to not only make collection calls, but to study my customers' habits. Who pays me quickly? Who is very slow to pay me? I use this information to help focus my efforts on customers who pay me without any hassle and better manage those who don't.
- Report #3: Accounts Payable Report -
I always want to pay my vendors on time. My accounts payable reports enable me to do this. Plus, these reports help me identify opportunities to negotiate discounts with my vendors, such as discounts for early payment. Those savings go right to my bottom line!
These are 3 reports you can access right now from your accounting software!
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