Financial reports are an important part of understanding where your business is now and planning for where you want it to be in the future.
But exactly how often do you need to be reviewing these reports? Advice you find on the internet varies drastically, from some suggesting a simple annual review to others insisting you schedule time in once a week to look everything over.
The truth is, there’s no one size fits all answer to this question. How often you need to review your reports depends on what stage your business is in. Here are our recommendations for how often you should be looking over your business reports, and why it matters:
Even businesses just starting out need at least a biannual review
Even if you’re on day one of your eCommerce business with a total of two sales, we don’t recommend reviewing your reports any less than twice a year. The purpose of accounting is to help you make better business decisions, but you can’t make those decisions if you’re not reviewing your data.
For example, what do your profit and loss statements look like? Are you in a position to hire more team members or invest in new assets, or is it best to hold on to the cash you have for daily operations? Reviewing your reports helps you make these decisions with confidence and objective data backing you up.
At least a biannual review will also help you prepare for paying your taxes. No one likes a surprise tax bill, and it can be crippling to a small business to owe an unexpectedly large sum to HMRC. With at least a biannual review, you can start setting aside cash based on your current tax estimates, though we recommend reviewing far more often than this to most business owners.
Quarterly reviews are best for small businesses
At Tailored, we do at least quarterly reports for all our clients. This is because in the business world, and especially in the t.v industry and e-commerce, things can change very quickly. You’ve probably already experienced peaks and valleys in the volume of your transactions, your expenses and your gross profit, and all of this will affect your ultimate tax liability.
With quarterly reviews, you can be better prepared for tax season and not worry about overspending and feeling cash-starved when HMRC comes knocking. Plus, this can also be a good check-in to make sure you’re not getting behind on your bookkeeping if you’re doing it yourself. Having to catch up on three months of data is a lot less hard than catching up on six months!
Increase to monthly reviews if you have a turnover of more than £250,000 or you have a fast growing business with changes ahead.
Months come and go very quickly. That’s why we only recommend monthly reports AND reviews if your business is growing incredibly quickly. Your circumstances will be changing rapidly if your turnover is over £250,000 and profit margins may be tight in a growth stage, so it’s important you stay on top of all those changes so you can keep building on your success.
However often you’re reviewing them, your financial reports are only as good as the data behind them. We specialise in setting up financial systems that run efficiently and accurately without your oversight, so you can spend more time doing what you love. Take control over how fast you grow, how much you work and where you take your business. Book a call with us today.