Financial statements are records of business activities and a company’s financial performance. Government agencies, accountants, and firms at times audit them to ensure accuracy and for tax, financing, or investing purposes.
What Information Do Financial Statements Show?
Financial statements include:
- Income statement
- Cash flow statement
- Balance Sheet
Because lay people, or potential investors, as well as accounting professionals, analyze your financial statements, it is imperative to design your statements in an easy-to-use and easily understandable manner. Overly complex systems can create misunderstandings that could have vast ramifications.
What are KPIs?
Key Performance Indicators (KPIs) are predetermined data trends. Track these regularly to evaluate the wellbeing of your business. KPIs provide quick, easily accessible, and comprehensible views of how your business is functioning. Not to mention, they help in predicting long-term performance.
KPIs that you keep watch on may be different from those of other businesses; after all, every situation is unique. Having said that, there are five basic data types you can use as KPIs for most businesses. Mold them to suit your purposes:
- Revenue: Yes, the obvious must be stated. Track revenue consistently to ensure that your income is steady. Revenue is used as a KPI to track trends such as when revenue dips and why.
- Direct Expenses: Track direct expenses in terms of quantity and trends. For example, it could be helpful to have big expenses coincide with times of increased revenue.
- Overhead (ongoing business cost): This does not necessarily link to expenses but remains stable most of the time.
- Gross Profit Margin is an important indicator of how well you are balancing income and output. Ideally, it should trend upward, but there are factors that upset the trends. This KPI helps you to adjust pricing when necessary.
- Net Profit Margin is your profit after all expenses are taken into account. Keeping an eye on this helps you to keep expenses in check.
Have your company’s financial statements taken care of by reliable professionals so that you can focus on running the business. Contact Georgen Scarborough Associates, PC to get your financial statements in order.