Becoming an effective manager requires continuously honing and improving your management skills. This could mean exchanging resources with others in your network, reading books or publications, or taking online courses. Show
Not to be overlooked are the management tools you have at your immediate disposal: your business’s financial statements. Financial statements can be used by managers to track performance, budgets, and other metrics, and as tools to make decisions, motivate teams, and maintain a big-picture mindset. Access your free e-book today. DOWNLOAD NOW3 Financial Statements Used by ManagersThere are three key financial statements managers should know how to read and analyze: the balance sheet, income statement, and cash flow statement. The balance sheet provides a snapshot of a company’s financial health for a given period. It lists the assets, liabilities, and equity line by line for the period so that stakeholders can understand the breakdown. The income statement, also known as the profit and loss statement, or P&L, gives an overview of the income and expenses during a set period. Typically presented annually or quarterly, the income statement allows businesses to compare trends in income and expenses over time. Finally, the cash flow statement details the inflows and outflows of cash for a specific period. Broken into operating activities, investing activities, and financing activities, the cash flow statement demonstrates the business’s ability to operate in both the short and long term. When analyzed together, these statements provide a holistic view of the financial health of your organization. They can be used to learn from previous pitfalls and successes as you strategize for the future. Here are six ways you can leverage your company’s financial statements to excel as a manager. Related: How to Prepare a Balance Sheet: 5 Steps for Beginners 6 Ways Managers Can Use Financial Statements1. Measure ImpactAs a manager, it’s important to have a method for tracking the impact your efforts have on your company’s bottom line. Take a look at your company’s income statement, and note the direct expenses related to the revenue for that period. Perhaps you purchased a piece of software, requested more ad spend, or hired a specialist for a big project. Did those expenses result in the net income you were targeting? Moving forward, you can learn from your mistakes and double down on investments that paid off. 2. Determine BudgetsFinancial statements are also useful when managing and planning budgets. Because the financial landscape is ever-changing, John Wong, HBS Online’s Senior Associate Director of Financial Planning and Analysis, cautions against using previous financial statements as a starting place for future budgets. “Historical data is essential to building a budget, but should be used as a reference point and not necessarily a starting point,” he writes in a previous blog post. An understanding of your company’s financial health and history is necessary when budgeting, and should be paired with a forward-thinking mindset. 3. Cut Unnecessary CostsBeing able to see your company’s expenses line by line on both the income and cash flow statements can highlight areas where it’s possible to cut costs. Maybe you’ve been paying a monthly subscription for a service you no longer need, or your team outings could be scaled back in favor of more inexpensive activities. Seeing a list of every expense and how it impacts your company’s net income can be an eye-opening chance to save money and reallocate spend where it’s needed most. 4. Think Big-PictureKeeping the broader health of your organization in mind is vital when managing your team. Analyzing the balance sheet, income statement, and cash flow statement can allow you to understand the ins and outs of your company’s finances and give you bigger-picture clarity to guide your goal-setting and decision-making processes. Related: 5 Ways Managers Can Use Finance to Make Better Decisions 5. Align Across DepartmentsYour company’s financial statements can be used to ensure multiple departments are on the same page. When managers from each department have analyzed the statements, discussions about goals and budgeting can center on a shared understanding of the organization’s current financial health, and offer perspective into other managers’ goals and motivations. 6. Drive Team MotivationConsider using your company’s financial statements as tools to motivate and engage your team. The income statement can show how your employees’ projects positively impacted the company’s revenue, which could boost their performance and drive. When setting team goals, leverage financial statements to provide context for why specific benchmarks were targeted and the thought process behind your plans for reaching them. Instill in employees your same big-picture mindset and the knowledge that their efforts make a tangible difference to the company. Become a Finance-Driven ManagerYour organization’s financial statements are valuable assets you can use to make strategic decisions and manage your team. If you’re unsure of where to begin, brushing up on your financial literacy, networking with finance professionals, or taking a finance course are great places to start. Bolstering your financial knowledge can enable you to make the best use of the resources available to you and become a finance-driven manager. Are you interested in using finance to become a better manager? Explore our six-week online course Leading with Finance and other finance and accounting courses and discover how you can gain the skills and confidence to use the fundamentals of finance in your career.
Keeping accurate and up-to-date records is vital to the success of your business. Good records help you to minimise losses, manage cash, meet any legal, regulatory and taxation authority requirements and improve financial analytics. Your accountant can help you set up a record-keeping system. On this page
Record keeping is how you log, store and dispose of important financial information for your business. Records are:
You may need to access your records at different times of the year (e.g. for end of financial year) or on request (e.g. by the Australian Taxation Office). Talk to your accountant or financial adviser for tailored advice on:
Benefits of good financial record keepingGood financial record keeping can help you:
In this video you can learn about creating and maintaining good record-keeping practices in your business. This video covers:
There are certain record-keeping requirements for businesses in Queensland, and there may be specific laws and requirements related to your industry sector. You can keep records using either an electronic or manual system. You also need to make sure your records are secure, private, backed up and can be easily reported on if needed. The Australian Taxation Office (ATO) recommends that businesses use an electronic record-keeping system. The same record-keeping principles apply to both electronic and manual records. Learn more about digital record keeping for businesses. Talk to your accountant or financial adviser for advice on which method or system is best for your business, and your legal responsibilities for keeping records. Assess your record-keeping skillsUse the ATO record-keeping evaluation tool to identify what records you need to keep and review how well your business is keeping records. Electronic record keepingAn electronic record-keeping system, such as accounting software, makes it easier to capture information, generate reports, and meet tax and legal reporting requirements.
Having good accounting software or systems is important to keep your business running smoothly. The right system can help warn you if it looks like your business might run out of cash. Make sure the software has standard business reporting (SBR) forms needed to report to the ATO (such as BAS statements) and meets Australian tax requirements. Review what your business needs from accounting software before deciding which one to buy. Consider if you need software that can:
Free or paid software optionsThere are many software packages that allow you to successfully control records without needing accounting experience. There are free software packages available but make sure these meet your business's needs. There are many commonly used purchased accounting systems used by small businesses that are billed monthly or purchased outright. Consult with your accountant, financial adviser or industry organisation to assist with identifying the most appropriate software package. Software for Single Touch PayrollAll businesses must report tax and superannuation information directly to the ATO. This is known as Single Touch Payroll (STP). You should check that STP reporting is included in your accounting software. The ATO provides a register of software products that support STP reporting, including low-cost options for micro employers. SuperStreamYou must use the ATO's SuperStream to pay employee superannuation guarantee contributions to super funds. This ensures money and data are sent electronically in a standard format across the superannuation system. Make sure your accounting software is compliant with SuperStream. Understand your SuperStream requirements as an employer (including if you are self-employed). Learn more about digital record keeping for businesses from the ATO.
You may prefer to use a simple, paper-based record-keeping system.
You must keep your records for a certain period. The length of time will depend on the type of record and your business type or industry. There are legal requirements for how long you keep some records. These include:
Keeping your records secure and privateIf you collect and keep customer records, you'll need to protect and respect your customers' privacy. You may have to comply with the Privacy Act 1988. Read the Office of the Australian Information Commissioner's guide to privacy for small business to help you apply the national privacy principles. New technologies make it easier to access, transmit and misuse personal information. You will need to pay particular attention to securing online and electronic records. You should develop a privacy policy and train staff to implement it. Learn more about protecting privacy and information. Reporting on your recordsIf you use an electronic record-keeping system, you must be able to produce a hard copy of a record if the ATO or Australian Securities and Investments Commission (ASIC) request it. Find financial reporting requirements broken down by business type from ASIC. Backing up recordsSet up a secure electronic backup system to ensure records are safely stored and regularly backed up. Daily backups are recommended, particularly for important records. Online (or 'in the cloud') backup services allow you to access records from anywhere, at any time. They are generally inexpensive and offer benefits for flexible work and business continuity. Make sure any online system protects the privacy and security of your business and customers. Learn more about cloud computing. Cheap backup options include memory sticks and external hard drives. Make sure any physical backup copies are stored in a separate location to your business in case of fire, theft or a natural disaster. What records to keep
Keep these records to meet basic taxation legal requirements. Cash movement
Sales
Purchases
Keep these records to meet legal requirements and to accurately determine your tax position at the end of the financial year. Stocktake
Debtors and creditors
Capital gains details
Depreciation
Expenses
Staff and wages
Basic accounting records
Agreements
Assets and liabilities
Other documents
Keep your personal and business records separate to simplify business reporting and tax returns. For example, use a dedicated business credit and debit card for business expenses to make it easy to separate business and personal expenses. Financial record-keeping checklist
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