The 3 Reports Every Small Business Owner Should Understand

Not everyone goes into business because they love numbers. In fact, many small business owners I speak to openly admit that finance can feel a little overwhelming, especially when faced with reports full of jargon.

But here’s the good news.

You don’t need to become an accountant to understand your finances. There are just a few key reports that, once you’re familiar with them, can make a big difference to how you run your business.

Here are the top 3 financial reports every small business owner should get to know and what they can tell you.

1. Profit and Loss Report (P&L)

What it is: A summary of your business income and expenses over a set period (usually monthly, quarterly, or yearly).

What it tells you:

• How much you’ve earned

• How much you’ve spent

• Whether you made a profit or a loss

Why it matters:

This is your go-to report for understanding if your business is actually making money. It helps you spot where your income is strong and where your expenses might be creeping up. Looking at it regularly helps you make smarter pricing, spending, and planning decisions.

💡 Tip: Want to know if you can afford to hire, expand, or invest? Start here.

2. Balance Sheet

What it is: A snapshot of your business’s financial position at a single point in time.

What it shows:

• What you own (assets)

• What you owe (liabilities)

• What’s left over (equity or owner’s stake)

Why it matters:

The balance sheet shows the overall health of your business. Even if your P&L looks good, you might still have cash flow or debt issues hiding here. It’s especially important if you’re applying for a loan, attracting investors, or just want to know how stable your business really is.

💡 Tip: If your assets are shrinking or your liabilities are growing, it’s time to take a closer look.

3. Cash Flow Report

What it is: A breakdown of the money actually moving in and out of your business.

What it shows:

• When cash is coming in (e.g. sales, loans, refunds)

• When cash is going out (e.g. bills, wages, tax)

• Whether you’re cash positive or negative

Why it matters:

You can be profitable on paper and still run out of money. Cash flow tells you if you’ll have enough to pay your bills when they’re due. It helps you stay in control, plan ahead, and avoid nasty surprises.

💡 Tip: If you’ve ever had a tax bill arrive at a bad time, you’ll understand why this report is so useful.

Final Thought

Understanding your business finances doesn’t have to mean spreadsheets and stress.

By getting comfortable with just these three reports, Profit and Loss, Balance Sheet, and Cash Flow you’ll be in a stronger position to make decisions, spot problems early, and plan for growth with confidence.

And if you ever feel unsure?

That’s exactly what we’re here for. At Barleyfields Accountancy, we help business owners not just “get through” their finances, but actually understand them.

If you’d like help reviewing your reports or want someone to explain the numbers in plain English, get in touch. You don’t have to do it alone.

Emma

Barleyfields Accountancy