Four reports that show you the health of your business

woman on the phone

As a small business owner, it’s critical to do regular health checks to see how you’re doing. That means digging into your financials and all the data that comes with it.

But in an age where we’re bombarded by data from every direction, it can be difficult to suss out what information is valuable and what data is just a “nice-to-have.” But never fear—Wave has a number of reports and data points that offer both an at-a-glance view and an in-depth perspective of how your business is faring financially. The best part? This data is automatically generated—you just need to know what to look for.

Here, we’ll round up a handful of the most helpful reports and data that can offer you transparency into the health of your business.

The average time it takes to get paid

The concept behind this metric is pretty straightforward. This number is a calculation of the average time it takes for any of your customers to pay you.

While this calculation is fairly simple, it can have major implications on your business—especially your cash flow. When this number is high (think 60-90 days or more), that means more of your revenue  is tied up in late payments. This tightens your business’ cash flow, which can make it challenging to order inventory, pay vendors, and even cover your basic business costs.

When the average time to get paid is high, it can often mean your customers are late with payments (or you have a number of unpaid invoices). According to recent research, up to 60% of invoices are paid late. Based on the data, payments are sent six days late on average while another one-fifth of invoices are paid more than two weeks after the due date.

If this describes your situation, consider implementing one or more of the following tactics to shorten that average payment timeline:

  • Create stronger payment terms: On your invoices and/or in your client contract, outline your terms. Clarify the expected payment deadline (i.e., due upon receipt of invoice, Net30, Net60) and the types of payment you accept, like e-transfers, direct deposit, PayPal, or credit cards.
  • Institute a late fee: In your contract and invoice, establish an additional fee for late payments. For example, any payments received after the due date listed on an invoice is subject to a 10% late fee.
  • Create incentives for early payment: If you prefer not to take a punitive approach, you can offer rewards for customers who pay you early. Sometimes the promise of an incentive is enough to prompt clients to pay you sooner rather than later. For example, customers who pay up to five business days prior to the invoice due date can deduct 5% from their total bill.

Profit and loss

Image: Monthly in-depth report

Image: At-a-glance graph in dashboard

To get a deeper understanding of the health of your business, you’ll need to dig into just how much money you’re spending versus how much you’re making. A summary of both your income and expenses can offer you more insights than a straightforward revenue report. And that’s precisely what the automated Profit and Loss (also known as P&L) report aims to do—give you a view of your losses (what you’re spending) and profits (how much money you’re actually making after expenses).

Keeping a close eye on profits and losses can help you keep a check on money flowing out of your business as well as your average profit margin. With this perspective, it’s easier to ensure you’re not spending more on business expenses than you’re making.

Comparing profit and loss gives you bird’s-eye-view of what’s happening in your business so that it’s easier to uncover the “why” behind the numbers. For example, the graph above can help you track your year-to-date profits and spending to identify and understand any monthly or seasonal trends affecting your business. Some months, you may spend more and make less profit (like when you buy inventory for an entire quarter or invest in a major marketing campaign), whereas some businesses may see a huge spike in their profit margin in a month without a correlating uptick in spending (like those who sell most of their products during the holiday season).

This report can also help you identify issues like chronically low profit margins, soyou can identify this trend and take the appropriate action—whether that means slashing your expenses on increasing prices on your products or services.

Sales tax

Paying tax bills regularly is one of the many tedious items on every small business owner’s to-do list. After all, according to the U.S. Small Business Administration, sole proprietorships (businesses owned by an individual) can expect a 13.3% tax rate, while small partnerships pay 23.6% and small S corporations shell out 26.9% in taxes.

It’s tough to track and monitor sales taxes so you can seamlessly pay you bill on time. You need to avoid overpaying and disrupting your cash flow, or underpaying and getting in trouble with the government.

But don’t worry—you don’t need to whip out that calculator. Instead of manually calculating confusing sales tax percentages yourself, just run a Sales Tax report. This report automatically compiles all the data on what sales taxes you’ve collected so far this year. That way, when it comes time to file your returns and make out a check to the IRS or CRA, you know precisely how much you owe.

Income by customer

As many small business owners are aware, not all customers are created equal. While some contribute significant revenue to your business’ total income, pay invoices on time, and are communicative, you’ll inevitably come across clients who pay you late or not at all.

To help you identify your most valuable customers and those who are chronically late with payments, you can run a report on Income by Customer. Not only do you get a detailed breakdown of all your revenues from each company over a period of time (i.e., monthly, quarterly, annually), but you can also get insights into exactly how much they’ve paid on what they owe.

For example, let’s say you completed $5,000 in projects for XY Co. in the last six months, but they’ve only paid you $500 on that amount owed. With this report, you can quickly see that while XY Co. may be one of your highest billing clients, all that unpaid income doesn’t exactly put them at the top of your most valuable clients list.

Moving forward with small business reports

When it comes to running your business, you likely make dozens of decisions daily. From choosing new products or services to finalizing your marketing strategy to setting prices for customers, each choice will inevitably affect your business in some way.

But these and many other major decisions are easier when you have data—the right data—to help guide you. And regularly checking the information we’ve collected here can provide you with valuable insights that help you run your business better.

Categories:   Insights
Lindsey Peacock
By Lindsey Peacock
Disclaimer

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.