Avoid these financial reporting mistakes in your business.
1. Pretending you understand what the numbers mean
Financial literacy is not always a business owner’s strong suit. Of course, your reporting is rooted in data but it’s not the case that you have to view the end results in a numerical format. Many entrepreneurs and business owners require a more visual approach to management information which is the core reason we designed Futrli for everyone – no matter what your financial IQ happens to be.
Our foundation for reports creation is your accounting software and we pull that direct from Xero to QuickBooks Online. However, the final report is a mix of visually engaging charts, graphs and graphical elements – all designed to bring your business to life so you can make informed decisions.
A cash flow projection can be a colourful, 3D bar chart, or an insightful chart that maps out your cash position for each of the next 12 months. It’s customisable, it’s flexible and it helps clients to see the underlying patterns in your financial data so you can react and respond without missing opportunities.
2. You only review financial statements monthly or quarterly
Checking a map after having arrived at your destination is a pointless exercise. Likewise, failing to stay updated on your businesses journey with accurate reporting could mean you miss a business opportunity or fail to avoid pitfalls ahead of time.
As a bare minimum, your financial statements should be reviewed monthly. But the market is becoming increasingly competitive and businesses that are embracing Futrli to calculate their business’ financials in real-time, are gaining a massive advantage.
For example, if dealing with high turnover levels, a % here or there can make a huge difference to your bottom line. Likewise, when cash flow is sensitive and every penny counts, you need to be on top of your numbers every day, as a missed sale or miscalculated piece of expenditure can have a big knock-on effect.
3. Forgetting your business drivers and excluding non-financial metrics
When reviewing financial reports, don’t forget to factor in yourself! One of the biggest mistakes small business owners make is to forget to incorporate their own time. It’s so true that time is money (don’t you just love a cliche), especially when you’re working with people who are paid for their time. So be sure to treat your time like your money. The state of your P&L, balance sheet, cash flow should be viewed differently if you don’t take any form of salary and are reaching for the baked beans again.
Likewise, your business operations will be affected by a whole range of other non-financial variables that are rarely set in stone. Think units produced, the average cost of those units, staff levels, expected future client numbers. Your list will seem endless. So it’s a relief that Futrli allows you to analyse and take into account your non-financial data easily, which in turn lets you get the clearest picture possible of where you are going.
4. Are you scenario planning?
Planning for both best and worst-case scenarios in business is the smartest, risk-free approach. Surprises are good… but not if the surprise is that you’ve run out of cash. That way you can be sure to always be prepared for whatever the market or life throws at you.
In Futrli start by planning for the worst case and then work from there. Scenario planning allows you to work through different outcomes for your business. If you don’t, you might as well have your head in the sand – and that’s not a good place to be when the worst happens. When you’ve established what your worst case is – carry on playing with it. In a spreadsheet, this process is so laborious as to render it almost impossible.
In Futrli, though, it’s just one click to copy the entire scenario and then you can start playing again. Use your Boards to view the different outcomes side by side and tailor them to your business. This is the magic combination – powerful forecasting and the ability to view it anyway you need.
5. Failing to distinguish between cash vs accrual accounting
Cash received is not always cash earned. Accrual accounting requires reporting to reflect the timing of the transaction. The main confusion surrounds the following four terms:
- Unearned revenue: Cash received but not earned yet
- Accrued revenue: Revenue earned but cash not received yet
- Prepaid expense: Expense paid but not yet incurred (paid in advance)
- Accrued expense: Expense incurred but not paid yet
6. We can’t omit the most common mistake: omission
The Financial Reporting Council revealed the extent to which financial reports completed by companies were incomplete. Reports of costs are usually the ones not completely accounted for. It’s important that what is being spent and earned should be accurately represented in your reports.
After all, they reveal the current state of finances – money, revenue, and losses. It’s vital to get this right to give you an accurate view of where your business is at. Financial reporting is an accurate science and that’s its main advantage. With the right tools, errors can easily be traced and corrected.
Futrli automatically pulls in the data from your accounts package each day via our seamless API connection to Xero and Intuit. Trust us, life is so much better (and easier) when you’re not worrying about updating all your figures manually. Instead of chasing errors you can view your business performance and take action. Success takes enough hard work so this gives you one less thing to think about.