There are lots, and lots, of different types of financial reports.
Here are the key reports that will help you run your private practice smoothly. Remember that if you’re a sole trader, none of these reports are legally required, as long as you keep an accurate sales and purchases ledger.
However they can be extremely helpful in giving you a clear picture of your finances. They can act as a financial health check to make sure that your business is not in danger and help you make the right decisions.
These describe the performance of your business. If you run a limited company, financial reports need to be filed each year at Companies House.
The profit and loss account
This sets out your sales, less your expenses, in order to work out your profit. Expenses will consist of overheads such as rental of consulting rooms, advertising, and stationery.
The cash flow statement
This sets out how much money flowed in and out of your bank account over the previous year. You can use this to generate a cash flow forecast, which predicts what will happen in the future. You will input your fixed costs (e.g. rent) and variable costs (e.g. stationery supplies), together with forecasts of how much money you will receive, and when. This helps you to make sure that you have enough money in the bank to pay all the bills.
The balance sheet
This is a snapshot of your assets (what you own or are owed), less your liabilities (what you owe), in order to work out your working capital, at any particular date. This report shows the owner of a limited company (or its shareholders) how much their investment is worth.
These will help you make key management decisions, and include:
- an aged debtors summary, showing amounts owed by clients and how long they have been outstanding
- activity reports on accounts of clients or suppliers
- activity reports on expenses accounts
- historical monthly activity – helping you to predict peaks and troughs for next year
It is good practice to have a mini-statement produced every quarter. This can be in the form of an Executive Summary and keeps you on track about the health of your business.
Software – how it can help
There are many useful computer programs such as spreadsheets, accounting packages or private practice management software that will help you keep records and run reports.
Much of the work will be automated, and you will be able to see your accounts clearly and get key information for your tax returns. A computer accounting system generally has the following features:
- input and export of financial documents such as invoices
- recording of receipts against services
- recording of suppliers’ invoices
- recording of money paid into the bank
- recording of payments to suppliers and expenses
- payroll processing
Here are links to some of the packages available: