Unlock Success: Financial Reporting Tips Every Small Business and Franchise Needs
“You don’t know what you don’t know.”
When running a small business or opening a franchise, you’re on a “need to know” basis with all of your finances.
That’s why it’s so important to establish detailed and accurate financial reporting from day zero. That’s right, before you see one red cent deposited into your business account, make sure your financial reporting plans are ready.
Resources can be limited, especially for a young small business. As founders and business owners are stretched thin, priorities are constantly being rebalanced. Oftentimes, the pesky financial to-dos are left to be addressed at the last minute.
If you’re a business owner or franchisee trying to DIY your finances with tired eyes and an over-exhausted brain, don’t. Your financial reports are too important.
Financial reports help business owners create healthy budgets and forecast future financial opportunities — all while staying comfortably compliant.
At Acctivator, we have decades of experience behind us when we say this: effective financial reporting is one of the most vital priorities.
Below, we’ll share the most practical strategies to streamline financial reporting, ensure accuracy, and drive informed decision-making.
1. Streamline Your Financial Records (+ Separate Your Personal Records)
Being organized is not just for Type A folks anymore.
Organized financials are the cornerstone of a smart business. Financial management is more than tracking your accounts payable. Small businesses can avoid costly (and we mean very costly) errors and compliance issues.
Choose the Right Tools to Support Your Accounting
Centralize your record-keeping through cloud-based accounting software. At Acctivator, we support three powerful ERPs:
Each of these tools is a proven, small-business-friendly accounting solution that can help streamline cumbersome accounting tasks and centralize your most important accounting information.
How accounting software can support your business:
Tracking transactions in real time
Streamlining your reporting
Keeping your data accessible and up to date
Reducing risk
Providing a reliable foundation to make future decisions
Maintaining and organizing any supporting documents—including invoices, receipts, and contracts.
But, maybe most importantly, healthy financial reporting helps to build trust with stakeholders. This positions your business for healthy and compliant long-term growth.
Pro Tip: Keep your personal finances out of it.
Before moving on to our next tip, there’s one more important note. Make sure to separate your personal finances from your business. You’ve seen enough indictments and arrests to know not to mix business with personal, especially when it comes to money.
Even done innocently, mixing accounts can lead to confusion, errors, and challenges during tax preparation. Establish a dedicated business bank account to ensure clarity and separation of personal and business finances.
2. Establish a Financial Reporting Schedule
Just like your school days, you’ll want your report card to look good.
The key to a stellar financial report? Besides accuracy, it’s consistency. Develop a regular reporting routine to stay on top of your financial health.
Leave no room for unhappy surprises. Consistent financial reports help a business owner to immediately address challenges and seize opportunities proactively.
Regular financial reporting also helps build a habit of financial discipline, which is critical for long-term success.
Here are three reports any small business would be running
Monthly Reports: Profit and loss (P&L) statements, balance sheets, and cash flow statements work together to provide a comprehensive snapshot of your business’s performance.
Quarterly Reports: Every month is different, and seasonality can impact monthly financial reports. Quarterly reports help to dive deeper, identify trends, compare your performance against industry benchmarks, and analyze budget variances.
Annual Reports: Who doesn’t love a good end of year wrap up, a la Spotify Wrapped? Annual reports are crucial for tax filing, attracting investors, and setting strategic plans for the year ahead. These comprehensive reports provide a full-year view of your financial performance and are often required for regulatory compliance.
When you establish a robust financial reporting schedule that integrates monthly, quarterly, and annual reports, your business is building a foundation for sustainable growth and success.
3. Track KPIs That Matter for Your Business
Setting and tracking goals is essential for small businesses and franchises to measure progress and make informed decisions.
KPIs (key performance indicators) provide actionable insights into how your business is performing. Identifying your most meaningful KPIs will help you identify weaknesses and opportunities for growth.
For most businesses, critical KPIs include:
Profit margins: How efficiently your business turns revenue into profit,
Cash flow: Ensuring you have enough liquidity to cover operating expenses
Customer acquisition costs: Measures how marketing efforts impact customer acquisition and (down the road) retention rates.
Every business has its own unique set of priorities and KPIs. For examples, franchises and small businesses will likely track their own KPIs.
Franchises might track metrics like royalty payments, individual franchise profitability, and brand-wide performance, ensuring consistency across locations.
Small businesses, on the other hand, might focus more on local market penetration and cost management.
Customize KPIs to fit your business model and make adjustments as necessary. As your business grows, make sure your KPIs are tailored to follow its trajectory.
4. Avoid Common Mistakes by Adhering to Accounting Standards
Accounting has a little bit of a reputation for being boring and repetitive. If only!
Generally Accepted Accounting Principles (GAAP) are crucial for small businesses to maintain consistency, transparency, and credibility in their financial reporting. These frameworks provide clear guidelines on how financial information should be recorded and presented, ensuring that your reports are accurate.
Then we have local tax laws. Tax regulations can be complex and vary by location. This can make it challenging to stay informed and current when it comes to deadlines, deductions, and filing requirements.
By adhering to accounting standards and ensuring tax compliance, small businesses can build a strong financial foundation and focus on growth without the worry of regulatory setbacks.
5. Ensure Accuracy and Transparency
Sometimes, accounting can feel like a pretty precarious house of cards. One errant exhale in the wrong direction can cause the whole structure to collapse.
Accuracy and transparency in financial reporting is absolutely critical for small businesses and franchises.
Accurate reporting helps to build trust, avoid costly errors, and maintain compliance. Regular reconciliation helps to quickly identify discrepancies early and ensure the integrity of financial data.
Ordinarily, DIY solutions are great. However, when it comes to finances, working with experts is the way to go. Professional accountants or bookkeepers can elevate the quality of financial reporting and provide expert insights.
Financial professionals, like our US-based accountants and Acctivator, ensure that records are accurate and compliant. This helps you, as a small business owner or franchisee, make the most informed strategic decisions.
6. Plan Ahead for Growth and Compliance
Starting a small business or opening a franchise is a huge deal. It’s a brave and exciting time. Making it through a day, a week, or a year are all huge accomplishments—but what about further down the road?
As your business grows, make sure your financial systems progress alongside it. Work with a professional to make sure your finances are prepared to support your business as it exists today and as it expands and transforms.
Empower Your Business Through Better Reporting
Setting up smart and proactive financial plans from day one is a huge first step to eventual, long-term success.
At Acctivator, we’re rooting for you to succeed beyond your wildest dreams. We’d love to help set up your business for long-term financial success.
Contact us today to learn more, and to set your financial reporting up for success.