Making Sense of Your Financial Health
At Long + Cowan Chartered Accountants, we help Wellington businesses strengthen their financial performance with clear, actionable Financial Advice, sound Financial Planning, and strategic Business Advice. Understanding your financial reports is essential to make informed decisions, plan for growth, and identify where improvements are needed.
Located at Level 2, 276 Lambton Quay in Wellington Central, our office supports clients across the region and surrounding suburbs. With more than 75 years of experience, we understand how to interpret financial data in a way that empowers business owners.
Financial reporting is much more than record-keeping. It is a window into your company’s performance and future potential. While Financial Planning begins with budgets and cash flow statements, understanding other financial tools such as the profit and loss statement, balance sheet and variance report can reveal a more complete picture of your business’s health.
Accrual Accounting and Profit and Loss Statements
A bank statement or cash flow statement shows historical activity, but to stay ahead, you also need a forward-looking perspective. This is where accrual accounting becomes valuable.
Accrual accounting records income and expenses when they are earned or incurred, not when the cash is received or paid. This approach provides a clearer understanding of performance because it captures all financial activity within the period it occurs.
The Profit and Loss Statement (P&L), also known as the statement of financial performance or income statement, summarises income and expenses over a specific period. It includes all operating and non-operating activities such as sales revenue, cost of goods sold, interest payments, depreciation and asset sales.
This report indicates whether your business is making a profit or a loss. When combined with your cash flow statement, the P&L gives an accurate view of profitability, liquidity and operational efficiency. Analysing both together helps identify whether any adjustments are needed to improve results.
If you would like professional support reviewing your profit and loss statement or cash flow reports, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours, and we will help you interpret what the numbers really mean for your business.
Understanding the Balance Sheet
Another essential tool for financial management is the balance sheet, also known as the statement of financial position. This report captures what your business owns and owes at a specific point in time. The balance sheet is built around the formula:
Assets = Liabilities + Owner’s Equity
It details the relationship between your resources (assets) and obligations (liabilities), showing how much of the business is financed through debt or equity. By comparing the current period’s figures to previous years, you can identify trends, measure growth and evaluate financial stability.
Traditionally, balance sheets were prepared annually, but today’s accounting software allows businesses to produce them monthly or quarterly. Regular balance sheet analysis helps you adapt to market changes, adjust budgets and improve profitability.
At Long + Cowan Chartered Accountants, we help Wellington businesses generate and interpret these reports accurately using systems such as Xero and MYOB Accounting. We also provide detailed analysis to explain the implications behind the figures and assist with financial planning.
For help setting up your accounting system or producing an accurate balance sheet, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours to arrange a discussion with one of our team.
The Role of Variance Reports
A variance report compares planned financial outcomes with actual results. It is most commonly associated with the profit and loss statement, though smaller firms may also prepare variance reports for their cash flow statements.
This report highlights where income and expenditure differ from expectations, allowing you to identify potential problems early. It explains why these variations occurred and provides recommendations on how to address them. For instance, higher expenses might indicate rising supplier costs, while increased revenue could highlight successful campaigns worth repeating.
Variance reports are especially useful for decision-making because they translate raw numbers into insights. Combined with your P&L and balance sheet, they provide a complete view of performance and areas for improvement.
Our accountants can prepare and interpret variance reports for your business, ensuring that you understand what the data means and how to respond strategically. For guidance tailored to your circumstances, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours and we will explain how these reports can strengthen your financial management.
Why Professional Financial Advice Matters
Many business owners find that understanding financial reports can be challenging and time-consuming. Partnering with Long + Cowan Chartered Accountants ensures your reports are accurate, insightful and aligned with your goals. We translate complex financial information into practical strategies you can use to make decisions confidently.
Our services go beyond compliance; we help clients plan for sustainable growth, manage risks and build resilience in changing market conditions. From Financial Planning and Business Advice to tax management and cash flow forecasting, our experienced team provides the tools you need to improve financial health.
Whether you are preparing for the next financial year, analysing monthly results or exploring new opportunities, we can help you make sense of your reports and turn insights into action.
If you are considering moving from a bookkeeper to a chartered accounting firm, or simply want a better understanding of your financial position, contact us for more info by filling in an enquiry form or e-mailing or calling us during office hours, and our Wellington-based accountants will be happy to help.
