5 Accounting Reports That Are Critical to Your Business
For most designers, any topic that has to do with accounting or finances is not one they really want to talk about. But the accounting side of your business is where the bread (or is it dough?!) gets made, so to speak. It's as critical to your company's success as your creativity is. So, make this the day that you really buckle down and get your finances in order! I'm going to make it easier for you by giving you the 5 accounting reports you need to pay attention every single month (or week!) to keep your business running smoothly and at a profit.
Profit & Loss
You often hear this referred to as the P&L report, and it's a biggie! Basically it's a trend line for your company, showing you where you're making money and where you're not doing as well. This is one of my favorites because it's a great way to see what services or revenue streams may not be doing as well as others. When you see the profit margins for each part of your business, you really get an idea of where you may want to put more energy because you can make more money with fewer hours. OR you may want to retool a service that isn't performing as well to get those margins up.
This is more of a snapshot of where your business is financially at any given moment. So it will show your bank account balances, what you owe, property that you own, credit lines, and more. It will give you a quick idea of how much cash you have on hand, too. That's key as you look at your client pipeline and where you need to bring in more money to control your overhead.
Here's another pain point for most designers: Going after those outstanding invoices. No, it isn't fun, but this report will remind you of any payments that are owed to you. Keep an eye on this one because if you have clients who are always paying you late, then you may need to switch up how and when they need to pay (like BEFORE you do any work).
You know how you hate it when someone doesn't pay you on time? Don't be THAT person! This accounting report will keep you up to date on your own bills to pay, and you can even have it forecast ahead so you can see what's coming. By the way, for my own reports I always have an idea in my head of what my overhead will be every single month. That would include payroll, rent, insurance payments, utilities, etc. The things you have to pay every month. Once I understand that overhead amount that has to be paid, I can forecast the work I need to bill in order to cover it - AND make more money!
Revenue by Client or Service
This one is really really important!! You should always know which client or which service is bringing in the most money - because that's where most of your attention and time should go, too! BUT, do not be fooled by looking at just the number of dollars coming in. Be sure you understand which of your clients and services is giving you the best profit margin! You want to make the most money in the least amount of time or overhead. That's the key. So if your Designer Days are bringing you a ton of money, then do MORE of those! Understand where you're hitting those high profits!
These 5 reports will help you keep an eye on your company's finances and will help you make more money! But the key is to get started, to begin to get a handle on your financial goals. So, download my cheat sheet, a FREE Intro to Financial Terms to help motivate you to get control over this important part of your business! I know you can do it!