Top Secret: 3 Financial Reports Successful Business Owners Are Using To Grow Their Business Faster

Hello entrepreneurs!

When I say the word financial reports, what comes to mind?

Are you thinking something along these lines?

• It is the reports that I submit to my local government every year. (Year-end financial submission to my local government)
• Financial reports are used by accountants only. It has nothing to do with me.
• My accountant mentioned these reports all the time. But actually, I don't know what it is.
• It is a report with a bunch of numbers.

If you don't know what are financial reports, don't worry! Let's learn them today.

In this blog post, you will learn what are financial reports and the 3 financial reports that will help you grow your business faster. 

❤️ If you would like to read your financial reports like a pro so that you can use them to grow your business faster, click here to learn more about Master User Academy.

What are financial reports?

Financial reports or financial statements are the reports produced by your accounting system.

These reports are a great tool that gives you insights into your business's finances and performance.

These reports will tell you all about how your business is doing.

Is your business making a profit or loss?

Is your business financially strong or running in debt?

In short, financial reports contain a lot of valuable information about your business.

3 financial reports that will help you grow your business faster

As an entrepreneur or business owner, there are 3 financial reports that you should know:

• Balance Sheet Report
• Profit & Loss Report
• Cash Flow Statement

These reports will help you make better business decisions to grow your business faster.

Now let's dive deep into each of them!

Balance Sheet Report

The balance sheet report is now renamed to Statement of Financial Position.

This report reports a business's assets, liabilities and owner's equity at a specific point in time.

Let’s understand your balance sheet from a high level.

The assets section tells you how much your business has or how much your business owns on the date of your report.

The liabilities section tells you how much your business is owing to others on the date of your report.

The owner's equity section tells you how much the business owner owns the business on the date of your report.

Why is the balance sheet report important to business owners?

The balance sheet report is important to business owners because this report will tell you how financially capable your business is.

If you are applying for a bank loan, this report is the key to your loan approval.

The bank will approve or reject your loan based on your business's financial capability as shown in your balance sheet report.

This report has the answers to the following questions:

• How financially capable is your business of repaying its liabilities?
• Do you have sufficient funds either in cash or bank to pay your liabilities that will be due within the next 1 to 2 months?
• How much are your retained earnings, which are your accumulated profit or loss?
• Do you have high owner drawings which is the amount of money that you have borrowed from your business?

Profit & Loss Report

A profit and loss report is a financial statement that summarizes your revenues, costs, and expenses incurred during a specified period.

This report is commonly known as P&L and it is also known as an income statement but the official name of this report has been changed to Statement of Comprehensive Income.

Let’s understand your P&L from a high level.

The income section consists of all the trade income for your business.

The "cost of sales" section consists of all the costs that you must spend to sell your products and services to customers.

Gross profit tells you what your profit is after deducting your income from the cost of sales.

The other income section consists of non-trade income for your business.

For example, if your business sells stationeries and your business is collecting rental as a side income, the rental income is non-trade income while the income from sales of stationeries is trade income.

The operating expenses section consists of all other expenses incurred in the reporting period.

Nett profit or nett loss is the final amount of your profit or loss after deducting your operating expenses.

Why is the Profit & Loss Report important to business owners?

The profit & loss report is important to business owners because this report will tell you how your business is performing.

If you are trying out a new strategy to boost your sales, this is the report that will tell you if your new strategy is working or not. And if you're looking to reduce monthly expenses, this is the report that will tell you which are your top expenses.

This report has the answers to the following questions:

• Is your business making a profit or a loss?
• How many per cent of your total income is your real profit?
• Which are your top 3 highest expenses?
• If you have segmented your sales accounts, which are your highest sales?

Cash Flow Statement

The cash flow statement summarized how much money your business has received or paid. This report shows how well your business generates cash to fund its operating expenses.

This report is different from the balance sheet report and profit and loss report because this report only shows the actual money transacted while other reports are based on accounting transactions.

For example, unpaid customer invoices will not appear in this report because there was no money transacted while customer receipts will appear in this report.

The first section of the report is operating activities. Here you will find the total amount of money that your business has received or paid for your business activities such as receipts from business income and payments for the cost of sales and expenses.

The next section is Investing Activities. All money that your business has received or paid for fixed assets or investments is reported here.

The next one is Financing Activities. All money that your business has received or paid for loans or owner's equity can be found here.

The last section is Cash and Cash equivalents. This is your opening balance, the net change in cash for the period and the closing balance of all your bank accounts.

Why is the Cash Flow Statement important to business owners?

The cash flow statement is important to business owners because this report will tell you how well your business generates cash to fund its operating expenses.

If you are guessing all the time if your business is making money or not by looking at your bank balances, then this report is what you need.

This report has the answers to the following questions:

• Did your business generate more than you spent?
• How did your business receive money?
• How did your business spend money?
• Which is your top money-generating item?
• Which is your top money spending item?

Recap

So let's recap. Financial statements are a great tool that gives you insights into your business's finances and performance.

The 3 financial reports that will help you grow your business faster are the balance sheet report, profit & loss report and cash flow statement.

If you would like to learn how to read your financial reports like a pro, Master User Academy is the right program for you.

Easily understand what your financial reports are telling you by simply filling in our workbook so that you can use them to grow your business faster.

❤️ Click here to learn more about Master User Academy.

So which is your favourite report and why do you love it?

My favourite financial report is the profit & loss report because this report helps me to increase my nett profit.

I would love to hear from you.

Drop me an email or message us on Instagram, Facebook or YouTube and let me know! 😃💌