When was the last time you thought about your landscaping company’s financial reports? Maybe you’re an accounting-savvy business owner and familiar with all the ins and outs of your monthly, quarterly, or annual reports. Others have owned a business for a long time and are just learning the importance of truly reading their financial reports – or of having reports created in the first place.
You may be closer to the middle than the far ends of that spectrum. If that’s the case, you’re in the same boat as a lot of other small-business owners as far as your lawn care bookkeeping. You do have financial statements prepared, and you pay attention to them – to a point.
If that’s you, you probably pay the most attention to your Profit and Loss report (also known as an income statement).
This is a great starting place in bookkeeping for landscapers, but it’s only one part of the financial picture!
Here’s a simple breakdown of what different financial statements are for and how to use them to your advantage.
Profit and Loss statement
Also known as an income statement, this is the most common statement for business owners to pay attention to. These reports are typically straightforward and look at your business’ revenues and expenses over a period of time – whether that’s one month or an entire year.
In other words, a P&L demonstrates a business’s performance and measures different profitability aspects.
Balance Sheet
This may be the most overlooked and most important financial report you can review. It can often be more helpful than a P&L report because it provides a clear snapshot of your company’s overall financial health. It’s good to know whether you made a profit or loss in a given period of time, but balance sheets help you see the big picture.
Think about it this way: when you purchase a home, the house is your asset, and your mortgage is the liability. The difference between the cost of the house and your mortgage is equity.
Transfer this example to a business context – if your liabilities exceed your assets, your business is not healthy. If your assets far exceed your liabilities, your business is in sound financial condition. A Balance Sheet will help you see which boat you’re in.
Accounts Receivable
This report pertains to every customer you service. You want to keep a careful record of every payment your business is supposed to receive. It’s far too easy to let small payments from customers get lost in the shuffle. While it may be inconsequential at the moment, small payments can quickly pile up to equal a financial hit for your landscaping business that was never supposed to be there! It’s essential to thoroughly review your accounts receivable to ensure that collections are going as planned. And if they aren’t, a review of A/R processes is in order.
Cash Flow
The Cash Flow statement is another important report to pay attention to in your lawn care bookkeeping, and essentially shows your inflows and outflows of cash over a period of time. While this statement is important, it can be tricky to understand and interpret, so it’s typically one that your accountant will handle on their own.
Individual financial reports are helpful for providing a financial picture – but standing alone, they only give you a piece of that picture. You need the varying elements of financial statements to understand whether your business is thriving or barely surviving financially.
If you’re ready to get accurate and consistent financial reports with landscaping bookkeeping expertise to back them up, schedule a call today with Account Solve. Our accountants would love to help you!
