The 5 Best Financial Reports

"Send me your financials."

What I receive in response to this question is typically a mixed-bag.

Maybe there's a different answer depending on the recipient, but I'll share my 5 favorite financial reports. These are the ones I'd want to see in order to really help someone.

The 5 best financial reports (in order):

• One-month P&L YoY — This report shows you 1 month of results compared to the same month last year. It's useful to get very recent trends on revenue and expenses, but it can be thrown off by lumpy or non-recurring items (i.e. that insurance premium you pay annually). 1MYOY comes in at #5.
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• Balance sheet multi-quarter — A single-period balance sheet isn't all that useful. But several months, quarters, or years and you can get a complete picture. I prefer quarterly going back 4-8 quarters (that's 1-2 years). This one doesn't rank higher because its usefulness is limited to certain industries (i.e. less helpful for service companies). 4QBS comes in at #4.
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• Monthly P&L — When handed a P&L, I want at least 6 months but preferably 12-18 months (with cents rounded off please!). Now I'm getting a fuller picture of trends, margins, and fixed costs. This is my go-to report for calculating breakeven. 6MPL comes in at #3.
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• Cash flow statement — A cash flow statement bridges the gap between P&L and cash. Tell me where the cash is coming from and how it's getting spent. This report (ideally formatted in months or quarters) can almost give me a complete view of any business. 6MCF comes in at #2.
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• Rolling 12-month P&L — The big kahuna when it comes to financial analysis, this is the single greatest financial report ever. In this one, every column represents 12-months of a P&L (i.e. 12-months ending Jan, 12-months ending Feb, and so on). There is no seasonality, there is no excuse for lumpy or non-recurring expenses; everything is revealed on this report. I can quickly spot trends (good or bad) while getting a feel for overall health and performance. Drawback is you'll need ~18 months of financials to truly use it. R12MPL is #1.

The point is to look beyond your traditional one-months worth of financial data if you want a real picture of how business is going. All but one of these reports can be produced by your typical accounting software (QuickBooks, Xero, etc.); if you want a rolling 12-month, then you'll need to build that yourself (or with help!).

If you're feeling overwhelmed by all the numbers to look at, just start with a monthly P&L going back 6 months. That's the easiest place to start your monthly review. My only request? Never again settle for a single month P&L. Ever.

Your homework — Mix it up and try adding one of these reports to your next monthly financial review.

P.S. if you're looking for someone to build this type of financial analysis for you and your business, drop us a note!

P.P.S check out our past article on rolling 12-month analysis for a closer look at that tool