Guest Contributor

How Record To Report Can Help Your Business

By | Craig Middleton

The right financial habits can help your business with more than just keeping the books. Financial reports are snapshots that show you where your business stands at a given time and how it has been growing over both the short and long term. When you use the Record to Report system, it helps you develop the right financial habits, capture accurate information and have the data you need to move forward with your business goals.

Capturing the Information

The first step in R2R is to capture the right information. This means keeping receipts and filing them properly, but it also means entering all expenses and income in your accounting software solutions as they happen. These are good habits to get into for your accounting and tax responsibilities but can also let you see which little things are adding up in your budget and where you can make cuts. Before you change your budget numbers, it is a good idea to track them for one to two months first and then continue to track them to see how you are doing with the new budget.

Checking the Materials

At the end of every week, you will want to make sure that your tracking has been entered correctly and is labelled clearly enough to understand what kind of expense it was. This can keep your books more accurate as well as help you find the necessary receipt if needed for taxes or audits. Double checking everything is the best way to generate accurate reports and to make sure that something you thought you would remember in the moment is still understood later by yourself and others. Some software solutions let you scan receipts in and link them to the corresponding line in your spreadsheet, but keeping a physical backup is still a good idea.

Recording the Data

 The Record to Report method relies on your recorded data to generate accurate reports, so sending your files to your accountant or saving a copy in your system should be done on a monthly basis. This closes out the month and prepares the data for analysis by the reporting software to give you a monthly snapshot as well as quarterly and yearly ones. By comparing these monthly reports for past years, you can better predict which seasonal booms or busts you are likely to face in the future and plan your budgeting and scheduling around those forecasts.

Consolidating the Numbers

Once you have recorded your monthly data, you can print out four different financial statements: an income statement, the balance sheet, accounts receivable aging and accounts payable reports. These can either be consolidated and generated by you, by your accountant or by your software solutions.

Reviewing the Reports

Once you have consolidated the numbers and printed out the statements, it is time to review them by comparing last month’s reports to the previous one’s numbers. This will show you how much has grown, has stayed the same and has shrunk to give you a good idea for how to move forward. You can use the comparison to build a better budget or even to apply for a business loan or refinance an existing one. Since most lenders will need the statements you have compiled, being in the habit of doing this monthly can help you be prepared for financing your next growth spurt.

Acting on the Knowledge

Although the method is called Record to Report, it does not end with preparing and reviewing those reports. You will want actionable information that can help your company thrive in the future. Sometimes this action will be to do nothing new and others it will be making a large change. This step can often look like setting up trigger points for when to act such as a steady increase in liabilities, more overdue receivables, or even larger profit margins. Your trigger points can include opening a second location once your sales hit goal numbers or making reminder calls once a receivable approaches the due date.

Using the Record to Report method for your company’s accounting process can do more than just make sure that your paperwork is in compliance with state and federal regulations, it can also improve the way that your business grows and functions. You can use the financial statements generated every month to track and make changes to your budget, to see how far you are in your company’s goals and even to apply for financing when needed. Getting into the habits of recording your expenses and income as those things happen can also keep your files in better condition if you are ever audited.


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