We all need to prepare financial statements for compliance. However, there's a lot more that you can get out of your financial statements if you know what to look for.

Over time, financial statements have become incredibly complicated and lengthy. For a lot of business owners, they're downright overwhelming to examine with pages and pages of information.

To get past this obstacle, we've collated a list of key metrics for you to focus on.

It is also important to assess whether you have a positive net present value (NPV) situation. According to Investopedia, NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Financial statements are written records that convey the business activities and financial performance of an entity. They are often audited by:

Financial statements are audited to ensure accuracy and for tax, financing, or investing purposes. To repurpose Cuba Gooding Jr.’s unforgettable line from the movie Jerry Maguire, financial statements show us the money. They illustrate where a company’s money came from, where it went, and where it is now.

While financial statements can be very helpful, these are typically only consulted annually and can miss vital pieces of the puzzle as a result of being based upon historical data. For this reason, it can be far more useful to consult management accounts as well.

While financial statements are more compliance orientated and focused on external parties, management reports are not mandatory and are more internally orientated.

Proper monthly management reports are more helpful for business owners to gain insight on specific areas of their business. However, if you are seeking funding, you need annual financial statements.

Financial statements are valuable but they use historical information as opposed to real-time data. On the other hand, by regularly looking at management reports, you can get a better sense of how your business is doing today.

Instead of providing an overarching evaluation of your business, management reporting zeroes in on segments of your business, allowing you to focus on specific details such as the drivers of your business. Management reporting allows you to dive deeper into the financial standing of your business by analyzing things such as:

When generating management reports, it's important to focus on the reports that you need to drive strategic decision-making.

As the CEO or owner of a business, you can use management accounts to evaluate:

We recommend a once monthly management report review to serve as a kind of health check. It's much easier to keep tabs on how your business is doing and to work on any issues that arise as they arise, rather than at the end of the year after these problems have been able to multiply for months.

There's a wealth of information at your fingertips thanks to the internet. And the accounting software available today is geared towards businesses more so than accountants. That said, do you really want to take a stab at financial and management accounts on your own?

Think about it this way. Anyone can cook food for themselves at home, but some people are much better at cooking than others. When trying out a new, complicated recipe for a family function, would you rather follow a detailed set of instructions and a video from a famous chef or just wing it? Maybe you're a great chef and you would wing it... But winging it with your financial data means putting your whole business on the line, not just Sunday lunch.

An accountant or advisor is doing management reporting everyday. They’ve seen hundreds of other similar businesses, and hundreds of similar examples. While you may be the best shoemaker in town with 35 years of experience, this doesn't mean you can do everything for yourself. And even if you could, trying to do it all, would steal precious time from what you really should be focusing on - making shoes.

When it comes to leveraging your financial information, you need valuable insights, not just compliance work. Your accountant will look at everything and guide your through the process, providing expertise at a fraction of the cost of a financial manager. This kind of advice is key when it comes to financial growth.

Once you’ve got the key metrics to hand, you can use them to set goals for the next month, quarter, and year. It helps to find the right technology to help you scale your business. This can mean a combination of:

Financial reporting software can help you to interact with live data and grow your business.

To make the most of the financial information you have available, it's worthwhile to prepare both your annual financial statements and more regular management reports. In addition to this, having a trustworthy accountant will help you understand the finer details and derive actionable insights from these reports.

Financial reporting is necessary for compliance, for making sure that all the numbers adds up right. These kinds of reports can also help prevent cash flow problems.

However, management reporting empowers you to make better, data-informed business decisions. This isn't really an either/or scenario. For the best results, you need to be looking at both kinds of reports.

At least, thanks to the trusty accountant and the advent of the latest technology and AI-generated insights on software like Syft, you don't have to produce - or interpret - these reports on your own. If you have any queries about what we do at Syft Analytics or how we can help your business make better data-informed decisions, please book a call with one of our experts.

​