Reviewing you Expenses from Month-to-Month
Running a business requires diligence in maintaining a well-documented accounting system. If you don’t carefully follow your income, accounts receivable, accounts payable, expenditures, and other financial transactions, you are sure to have problems with your success and your organization.
The best way to make sure that all of your finances are in order at all times is to create monthly reports, through which you can assess all parts of your economic functionality. Monthly reports can be created for all facets of your financial purposes, but one of the most important reports to work from is an expense report.
Reviewing expenses from month to month is important on several levels. First, you can analyze how much you are spending on a monthly basis, as well as where that money is being spent. Is the majority of your money going to utilities, or are you spending a lot on delivery services? Are you working with several vendors that are racking up a great deal of expenses? All of this will be apparent on your monthly reports.
Second, you can use these monthly reports to make sure that you are keeping up with your expenses. Combined with your accounts payable aging reports, you can compare how much of your cash flow is being appropriately applied to your expenditures and how much you still need to spend to keep up to date with your bills. If you don’t take a look at how much you are already spending, you won’t be able to plan for the future and create a budget to better manage your expenditures.
Another even more important reason to create monthly reports to review your expenses is to analyze ways to cut back on what you are spending. Your monthly reports will give you an overall amount that you are spending every month, as well as a breakdown of where that money is going. Therefore, you can look at your expenses individually, determining where you are overspending and not being efficient in your financial plan. For example, perhaps you have two vendors providing you with similar items and don’t need to use them both. Or, perhaps you’ll find that your electric bill is outrageous and can do some research to find another provider with lower rates.
Monthly reports can also help you identify areas where you can afford to spend more in order to better serve your business. For instance, you may be able to shift your income to bring in a greater variety of a particular product that sells well. By analyzing where your expenses are currently going and where they should be going, you’ll be more successful and earn more money. This is best accomplished with monthly reports.
Almost every accounting software system has the ability to create monthly reports, and many of them can be customized for your particular use in your field. Some are more sophisticated than others, and you can choose your software based on the simplicity or customizability and the computer literacy of the employees (or yourself) who will be making use of the software. You can most likely even automate the process, letting the software give you reminders of when the monthly reports are due.