QuickBooks can be more than just a basic bookkeeping program for you. It can help you address some of the biggest challenges and opportunities your business faces. Here are some of the most important questions QuickBooks can help you answer:
1. Am I making money, or losing money? Assuming that you enter information into QuickBooks correctly, QuickBooks will generate reports for you that will very simply answer this question.
Run Profit and Loss reports (found in Reports / Company and Financial ) to see whether you are making more money than you are spending. (Hopefully your company is doing better on this than the U.S. government!)
The Profit and Loss Prev Year Comparison report is especially helpful. With it you can tell if you are making or losing money in greater amounts than last year. Why is that important? Well, it can help you decide if your business is going in the right direction, or if you need to make important changes.
I’ve read that most new businesses fail because they don’t know if they are making money or not. If you are using QuickBooks, you shouldn’t be in the dark about whether you’re profitable.
2. Do I have enough cash? Are my business operations generating enough cash to fund the business? Run the Statement of Cash Flows report to see. You can run the report for different date ranges to try to determine what the trend is.
3. Who owes me money? Of course, that’s what the Customer Center is about in QuickBooks. But if you want to get an instant look at the highlights, go to Company Snapshot, and look at the “Customers Who Owe Money” pane. (If that pane is not enabled in your Company Snapshot screen, you can click Add Content and select that screen to put it into your snapshot). By instantly seeing which customers are in arrears, you can get on the phone and work on collections.
4. Which parts of my business are profitable, and which are not? If you use classes in your QuickBooks data, you can track profitability in different ways. For example, you can track profitability by location, by department, by division, by market…
The Profit & Loss by Class report then becomes very interesting. That report will show a separate column for each of your classes — your business areas. You can then see and evaluate the profitability of each. Is one of your business areas unprofitable? What will you do about it? Is one of your business areas especially profitable? What can you do to maximize that?
If you want more help in deciphering these issues, make an appointment with your CPA and come to the meeting armed with these reports. He or she will be glad to help you understand your company’s financial big picture.