How to Make the Most of Your Bookkeeping Solution


Brendan Tuytel


Reviewed by


June 24, 2022

This article is Tax Professional approved


A bookkeeping solution is an affordable way to master your business. To get the most of it, you can use the reports to inform your business decisions and improve your cash flow management. To get you started, here are some tips to simplify and help you navigate these reports.

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The income statement

The income statement is where you can review your revenues and expenses for a selected period of time. For all things revenue and spending, this is where you should start. Want to learn more about income statements? Check out our dedicated guide.

Identify your main variable expenses and set a budget

Every business will have fixed costs. A fixed cost occurs for the same amount every month (e.g. rent) . If you want to read more on fixed and variable costs and how to manage them, we’ve got you covered.

While your fixed costs are easy to manage, others can easily get out of hand if you don’t check up on them. It’s worth it to sit down and break down your income statement into what is recurring and what you can control. Once you’ve done that, set a budget. The next time you look at your income statement, you can quickly check how closely you’re meeting a budget without getting overwhelmed by the expenses that are out of your control.

Cut down unnecessary costs

Not all expense ledgers are equal. The return you get from hiring a contractor, building a website, or hiring a consultant is probably higher than that latest purchase of paper clips. Understanding the costs that are essential to your business and the costs that are extra will help you decide where you can cut down. Check out our glossary of some of the more common ledgers for small businesses.

If you’ve had a particularly successful week, look at your income statement for that period to ask yourself how much you spent on what and what value did it bring. Once you’ve found the template for what works, you can start reeling yourself in if unnecessary spending gets a bit out of hand.

Keeping a pulse on the essentials and the nice-to-haves can shape how you can spend cash consciously, or guide you if you experience a windfall of cash. Read more about managing your spending after a windfall.

Analyze your ad spend

It can be tempting to sink big amounts of money into advertising to chase that next lead or maybe you’ve been too frugal and you’re missing out on opportunities for exposure. The Marketing & Advertising Expense ledger summarizes what you spent across all platforms whether it be Google Ads or distributing fliers.

You can also compare your sales revenue numbers to your ad spend to see if there’s a positive correlation. If your revenue was boosted significantly in a month where you spent more on marketing, it might be time to create more space in the budget for ads.

Decide if you can bring on more help

It can be contractors or employees (and you can review the difference between the two here), but most businesses will at some point need a helping hand. By tracking the amount you spend on help and looking at your net profit, you can start to figure out if there’s room in the budget for more assistance. It’s worth looking into these numbers weekly, bi-weekly, or monthly so you can align your numbers with your payment cycle.

Understand your profitability

There’s gross profit, net profit, profit margins, the list goes on for measurements of your business’s profitability. Read a CPA’s breakdown of gross vs net profit and why they’re both important numbers to know.

If you want to know if your business is making money, your income statement is your first stop. The term the bottom line? That’s actually referring to the last line item on the income statement: your net profit. There’s a lot of information to take from an income statement, but it’s always worth taking a moment to check your profitability.

The balance sheet

If you want to see how much money you have and where it’s kept, look no further than your balance sheet. This is where you will see how much you own (your assets), how much you owe (liabilities), and whether there is enough cash to cover the liabilities (your current ratio). If you want to read more balance sheets, look no further than our blog post.

Identify how much usable cash you have available

If you’ve got money in multiple places, it can turn into a frantic search of how much is in what bank account, logging into multiple websites. Fortunately, your balance sheet has all that information for you. You can quickly check the cash you have available to make a decision on whether you can afford that next big purchase. Or, if you’re a seasonal business entering a down period, get a pulse for how much cash you have available to make it through that time.

See if you can afford to take on a new loan

If that next big opportunity is still financially out of reach, a loan can help you get there (and we’ve got a guide on how to get one). But you should first look at your balance sheet to see if it’s affordable.

Your balance sheet will provide you with the total value of your assets and your liabilities. If your assets are greater than your liabilities, you’re in a strong position to take on a new loan. But if your liabilities are starting to outweigh your assets, it’s time to get critical. That funding option might not be the best choice. Instead, look for other ways to bolster your cash flow like promotional pricing.

The cash flow report

A cash flow report isn’t always provided by a bookkeeping solution, but if it is, it greatly enhances your experience. With Bench handling your bookkeeping, you can request a cash flow statement from us at anytime. Read more about what a cash flow statement can tell you here.

These reports give you the most important information from an income statement and balance sheet in one. Here, you’ll be able to see your up-to-date spending to break down how it’s affecting the money coming into and staying in your business.

A balance sheet and income statement are essential to understanding your business, but with Bench, and a bookkeeper on your side, you’ll be equipped with what you need to know to master your business. Think of these reports as more than just the required documents of a loan application or that piece of paper your CPA needs at tax time. These are the health indicators of your business and when used properly can help you grow to new heights.

Additional resources

Bookkeeping and accounting 101

Equip yourself with free tools for your business

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
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