The 5 Essential Accounting Reports for Your Business in the Philippines
Accounting reports show a simplification of your company’s financial performance, helping you make sensible financial decisions for growing your business. These reports record the transactions, budgets, cashflows, and revenues that your company accomplished during a specified period.
It is important to be aware of the different types of accounting reports as their functions differ from one another. Doing so will enable you to organize your accounting reports and know which report to look at to assess certain aspects of your company’s financial performance.
What are Accounting Reports?
Accounting reports are periodic statements that present the financial status of a business. The reports provide in detail the transactions and operations of the business for a period of time.
These reports can be brief, showing an overall view of the company’s financial performance during a specified period, or custom-made, focusing only on aspects like the profitability of a product or the details in a product’s sales per region during a specified period.
5 Important Accounting Reports for Your Business in the Philippines
There are five essential accounting reports to keep in mind when running a business in the Philippines. And they are as follows:
- Profit and Loss Statement
- Balance Sheet
- Accounts Receivable Aging
- Revenue by Customer
- Accounts Payable Aging
These reports help owners, managers, investors, and stakeholders evaluate the financial performance of their business and realign their financial strategies if need be.
Profit and Loss Statement
A Profit and Loss Statement (P&L), also known as income statement or statement of operations, is a financial report that summarizes the revenues, expenses, and profits as well as the losses incurred during a specified period. The P&L statement is the report that shows the ability of the company to generate sales, create profits, and manage expenses.
The categories generally found in a P&L statement are:
- Revenue and Sales
- Cost of Goods Sold
- Operating Expenses
- Selling, General, and Administrative (SG&A) Expenses
- Marketing and Advertising
- Interest Expense
- Net Income
The P&L statement is also the best way for you and your investors to view your net income. It’s also what investors look at for decision-making since their net income determines the annual taxable income of their business.
A balance sheet is a company’s financial performance at the end of a specified period. It allows investors and stakeholders to see what the business currently owns and owes. The balance sheet reports the company’s assets, liabilities, and shareholders’ equity. The information in the balance sheet also determines whether or not the company qualifies for additional credits or loans.
There are three major components within a balance sheet:
- Assets. These are things that the company owns, which are acquired through transactions and have future economic value that can be expressed in monetary terms (dollars, peso, euro, etc.). In short, assets are your cash, inventory, and property.
- Liabilities. These are obligations the company has. Usually, these are what they owe from creditors from past transactions. Things like wages, rent, utilities, and loans fall under a company’s liability.
- Shareholders’ Equity. This is money attributable to a company’s shareholders. It is also known as “net assets” since it is equivalent to the total assets minus the liabilities.
Accounts Receivable Aging
Accounts Receivable (A/R) Aging is a financial report that tabulates a company’s “accounts receivable” (a sum of money that has not yet been paid by customers). A/R Aging categorizes accounts according to the length of time an invoice has been outstanding. The accounts are categorized as follows:
- 1-30 days past due
- 31-60 days past due
- 61-90 days past due
- Over 90 days past due
The A/R aging report is also used by collections personnel or management to keep track of invoices and see which are overdue for payment. This helps the company identify which customers pay late or on time.
Revenue by Customer
Monitoring the revenue that your business receives from your customers is also crucial. This report shows how much your business generates revenue on a per-user basis.
The Revenue by Customer report is common for service-heavy businesses because it helps them measure how robust a particular product is across their customers. This measurement helps the company decide which services they need to keep and which ones they need to improve or remove.
Accounts Payable Aging
Not only does money need to come into the business, but it also has to come out. The Accounts Payable (A/P) Aging Report outlines the due dates of bills and invoices a company needs to pay.
A/P aging reports organize payments into separate “buckets”, each bucket representing a different time period. Buckets help business owners and managers see which payments are due in a month, the following month, and so on.
Time periods or buckets are usually categorized as:
- 0 to 30 days old
- 31 to 60 days old
- 61 to 90 days old
- Older than 90 days
Having an A/P aging report is a way for your company to monitor your debts or unpaid invoices in check.
Get Your Accounting Reports Organized
It is imperative to keep in mind how vital these reports are because owners, managers, investors, and stakeholders use them to make informed decisions when evaluating the financial performance of their business.
Accounting reports help your business grow by giving you an organized and visual copy of your company’s financial status, activities, and progress. If you find it exhaustive, you can avail the services of an accounting, bookkeeping, and tax services provider to help you manage accounting reports for your business in the Philippines.