CASHFLOW AND PROFIT / LOSS REPORT ANALYSIS: TOP REPORTS THAT MANAGEMENT MUST SEE.
Many Companies in India use Tally as a software for their Accounts Requirement, wherein daily entries and records are updates about the sales, purchase and bank entries are updated.
However, this tally helps us in analysing the financials and the loopholes of the Company at a deeper level and helps the management get reports which are very useful to them.
Cash Flow report:
Business has turnover of 5 Crores. Profit & Loss account shows a profit of 20 Lakhs. However, the Company does not have sufficient money to pay to the Creditors or repay the Government dues. Every individual in business face this issue.
However, monthly cash flow statement helps in analysing why the Company does not have sufficient cash in hand to pay the dues even after profit been there in books. It is a report about the total cash inflow during the month and total cash outflow which means actual cash and bank expense and receipts which tells us the cash available in hand as Profit and loss account is booked on accrual basis and Cash flow is actual basis. This report is must for the management as the Management understands the actual gap in working capital.
Outstanding Receivable Report:
It is highly recommended that the receivable ratio should match with the industry standard because increase in sales every month but lack of money is a major factor where the business gets affected. If the receipt of money from the clients is on time, company can focus on sales and build new prospects. Outstanding receivable report give a breakup of the amount which are to be received for each party along with bill details.
Every organisation must see the ratio analysis chart which helps them understand the debtors turnover ratio, payable ratio, working capital ratio so that the Company understands that which are the areas the Company should focus on. These ratios should be compared with the Industry standard and checked whether you are going on the right track or there are loopholes where the management need to focus.
Apart from these, there are many other reports which the Management must get it from the Accounts head and get a proper understanding from the Account team, as just keeping a proper tally record does not solve the issues, proper analysis on the basis of the entries helps the business owners understand the loopholes in the accounts and other departments as well.
The writer is a Practicing Chartered Accountant in Mumbai. The information shared is only for knowledge purpose.
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