A good accountant is critical, but as a business owner, it’s ideal to have a firm grasp on the financial health of your business, with or without one. If you need better reporting, QuickBooks Online's comprehensive tools will quickly become valuable asset to you. Once you’re familiar with some of the key reports that are available, you can make more autonomous decisions and bring more accountability to your team.
The information that Quickbooks Online puts at your fingertips, even on the go, allows you to make informed decisions on the fly with confidence. Whether you need a snapshot in time of the big picture, or you need to drill down into minute details, the reporting capabilities built into QuickBooks will save you considerable time and help you minimize expensive errors.
Quickbooks Online puts the information you need right at your fingertips.
Don’t worry. Even if you’re new to QuickBooks Online, or you’re a typical business owner wearing many hats with little time for accounting, you can master a few critical reports in just minutes a day. This quick guide will zoom in on five key reports available to the small business owner, and highlight the many ways they can empower you to guide your business effectively and efficiently.
Profit and Loss
What is it?
The Profit and Loss (P&L) report is also known as the Income Statement. It really is as simple as it sounds. Sales (revenue, income) minus costs (expenses) resulting in either a profit or loss (net income).
Within the report, QuickBooks allows you to break down both sales and costs into as many categories as you need. For a simple example, a bar would break sales down into food and beverage and those two categories into any number of smaller categories.
Costs are broken down into Cost of Goods Sold (COGS) or Cost of Services (COS) for a service business, and a broad category called Selling, General, and Administrative (SG&A). SG&A includes expenses, such as legal and accounting, that don’t factor directly into the production of the goods you sell.
Within these two categories are any number of smaller categories. For instance, the same bar will allow you to break down COGS into labor, supplies, etc.
You’ll see that QuickBooks subtracts COGS or COS from Sales to get your Gross Profit (or Gross Margin) and then further subtracts SG&A from your Gross Profit to arrive at your Profit or Net Income.
The P&L will show you how a change you make to the business is affecting your bottom line.
What the P&L Reveals
The P&L is a summary of your revenue and expenses over a certain time period (choose month, year, fiscal quarter, fiscal year). This allows you to see changes in certain accounts over time. Did you spend more on labor this year than last? Has the price of feeding the office gone up this month? The P&L lets you make quick comparisons.
It can also show you how a change you make to the business is affecting your bottom line income (and is where the expression “bottom line” comes from). Continuing with our bar analogy, did hiring extra help over the holidays actually cost in profit, or did it save money overall? The P&L will have the answer, and QuickBooks Online will put the answer in front of you quickly.
What is it?
When your business receives an invoice to be paid, the amount is recorded by QuickBooks in the Accounts Payable category and an expense is recorded. The Accounts Payable Aging report lists the invoices in chronological order, grouping them according to age – as in, less than 30 days, 30 to 60 days, or 90 days. Your electric bill, for instance, once entered into QuickBooks, creates a debit to the utilities expense category and a credit to accounts payable. You’ll see it at a glance on the A/P Aging report according to how long it’s gone unpaid.
What the A/P Aging Report Reveals
Carefully handling your accounts payable means saving money in late fees, managing cash flow properly, and maintaining good working relationships with vendors. QuickBooks A/P Aging report tool will show coming expenses broken down by vendor, due dates, and payment terms.
A good cash flow strategy can make or break your business and this report is an important part of that. This report becomes especially critical and money saving in a crunch. If you recognize by checking ahead of time that funds won’t be available for a payment coming due, you’ll have time to act accordingly. You might cover the expense with a loan or re-negotiate payment terms prior. Keeping your eye on this report will keep you informed and ready to catch red flags.
Carefully handling accounts payable saves you money.
What is it?
Accounts Receivable refers to the amount your company is entitled to receive in exchange for services or goods you’ve already delivered to customers. With a similar format to the A/P Aging report, the A/R Aging report will show you, at a glance, all amounts owed your company. These amounts are categorized by the length of time the invoice has been outstanding. When an invoice is sent, the amount is recorded by QuickBooks in the accounts receivable and revenue accounts.
What the A/R Aging Report Reveals
This report allows you to see quickly how much credit risk you’re taking with customers, and any red flags coming from the opposite direction. Do you have a customer who ties up too much of your cash flow? Do you notice a change in a customer’s paying habits that warrants investigation? Is a change in your payment terms needed or tighter reins on your payment policy required to free up cash flow for Accounts Payable? QuickBooks Online allows you to analyze the situation and act based on up-to-date information.
Your A/R aging report can point out changes that may require further investigation.
What is it?
When it comes to sales tax, QuickBooks Online provides a Sales Tax Liability Report as well as a Taxable Customers Report. Choose “Taxes” and then “Sales Tax” from the menu. This opens the Sales Tax Center where you’ll see the “View Report” button under the Sales Tax Owed section. This report shows the total taxable sales, tax rate, and amount of tax collected. The information is broken down by tax district.
What the Sales Tax Liability Report Reveals
This report is another important way to keep an eye on cash flow by checking for impending liabilities. A quick glance can prevent unfortunate surprises. It also allows you to compare the cost of doing business in different states or tax districts.
Even if you’ve taken tax reporting off your plate by delegating it to LumaTax, software like QuickBooks still gives you valuable and instant information about taxes and their implications to your bottom line as well as cash flow. Having integrated functionality between LumaTax and QuickBooks will be a huge time saver for you in the long run.
A quick glance at your Sales Tax Liability report can prevent unwanted surprises.
What is it?
Vendor or Purchase reports can give you information about purchases, expenses, and open purchase orders in incredible detail. Purchase reports in QuickBooks Online can be sorted into purchases by vendor, purchases by item, and open purchase orders. QuickBooks will show you the total amounts and individual transactions under each category. Purchase reports can also be sorted by job when relevant.
What the Vendor/Purchase Reports Reveal
Like the other reports mentioned, these can be highly valuable for forecasting cash flow. Additional uses of the purchase reports include estimating inventory levels and job costing. With the level of detail available, these reports afford a great deal of expense planning and analysis. Vendor reports are a great tool to use in negotiation with a vendor and in cost comparison between vendors. Often within these reports lie possible hidden savings that make them well worth scrutinizing.
Your purchase reports can be broken down into incredible and revealing detail.
These 5 simple but critical reports can reveal a great deal about the health of your business. The information contained within them represents a possible gold mine of cost savings.
- Catching mistakes before they happen saves time and hassle.
- Making a routine of checking these reports weekly will provide peace of mind and the confidence that comes with having a clear picture of your business’s financial reality.
- Powerful software, like Quickbooks Online, simplifies your life as a small business owner and helps you see quickly and make informed decisions about what matters.
- Combining QuickBooks with a service like LumaTax keeps you organized and compliant and saves valuable time.
Learn More About LumaTax