Accounting statements are an integral part of any financial documentation for any business. If you are an architectural firm, accounting reports for architects will allow you to track your company’s financial history, forecast future revenue, and maintain accurate financial records for tax purposes.
Explaining an Accounting Reports for Architects
Accounting reports for architects are financial reports that your architectural firm can file to show financial history and current financial standing. Using these reports, your financial analyst will be able to predict the financial situation in the future.
Familiarizing yourself with accounting reports will provide valuable information about every domain of your business. Other benefits include
- Knowing the exact financial performance of your business
- Gaining better control of your finances
- Keeping track of all transactions
- Maintaining your budget
- Assessing financial standing
- Based on legacy financial data, you will be able to determine or forecast the profits of each project.
- Track your firm’s entire financial history
- Organize your invoices and business transactions
- Report finances for tax and legal purposes
- Report financial information to financial managers and investors for funding purposes.
5 Accounting Reports for Architects
While there are several types of accounting reports but here are 5 main accounting reports useful for your architectural firm.
#1 – A Balance Sheet
Your firm's balance sheet contains information about the ending balance of your business at a given point in time. It can be the balance end of the day, week, month, quarter, or year. The balance sheet of your architectural firm also provides you an opportunity to identify and evaluate your liquid assets as well as financial reserves.
In case you are seeking funding, a balance sheet will allow lenders and investors to establish the current financial standing of your firm. Typically your business can set your own accounting style, and someone, ideally an accountant, can create a balance sheet for you at the end of each financial cycle. The balance sheet data comes from your ledger.
#2 - Cash Flow Report
As the name suggests, cash flow accounting reports for architects show where your money is coming from and where it is going. This will help your firm see how good you are at generating cash and optimizing your spending. The more you earn and the lesser you spend, the greater your profits will be.
Whether you are an architectural firm owner, executive, or decision-maker, you must learn to read a cash flow statement. This will help you gain useful information about your business operations expenses and profitability, financial standing, and investment needs and opportunities.
You can easily measure the cash flow of your business for any specific time frame. For instance, you can check the overall cash flow for the last 6 months or even specific dates such as "from July 1, 2021, to October 31, 2021," etc.
When preparing your cash flow report, your accountant or financial analyst will dig deeper into every department looking for information on:
- Your equity accounts
- All liability accounts
- The revenue sources and accounts
- The expense accounts
- Asset accounts
# 3 - Income Statement
An income statement refers to an accounting report with details about your architectural firm’s overall revenue and expenses. You can use an income statement to determine your business’ overall net profit.
An income statement is sometimes also called a Profit and Loss Report. Every business opens its doors for one reason, i.e., to make profits. Therefore, it is imperative for you to have a clear understanding of your profits and losses.
Understanding your income statement/profit and loss will help to know whether your business has been successful so far and what the chances are in the future. If your architectural firm is barely making ends meet or not making enough profits, it is time to make some changes in your strategy.
Remember that your firm’s profit and loss statement is different from a balance sheet. A balance sheet only gives you an overview of the entire financial condition of your business. However, you can use an income statement to check how much money your firm made, the sources, and the profit amount after paying all your dues.
The 5 key factors every profit and loss statement addresses are:
- The revenue your firm generated
- The directs cost of running an architectural firm
- The indirect costs
- Administration and general business expenses
- The net profit your firm generated in the last year
While generating this report, your account will use a wide range of data from accounting journals and ledgers. Furthermore, the compilation of an income statement will also require the scrutiny of each department individually.
The profit and loss accounting reports for architects include primary and secondary income sources to determine the accurate figures.
#4 - Payroll Reports
Payroll accounting reports for architects allow your business to keep track of your payroll history and details. This information is extremely vital in making various financial decisions. You will need these details even when filing for employees' and subcontractors' taxes or reporting them to the authorities.
However, there are five most common types of payroll reporting that you must run, these are:
- Sick and Vacation leave report
- Payroll Tax Liability
- Payroll wage and tax summary
- Overall payroll cost
- Employees compensation and other associated costs
#5 – Tax Filing Reports
As an architectural firm employing a workforce, you will be responsible for providing your subcontractors and employees with their income reports for the previous year. These are known as W2s and 1099s.
If you are directly employing a worker, you will have to provide a W2, whereas a contracted employee will need 1099 from your firm. Make sure to submit your tax filing reports by the end of January each year.
Not to forget, you are also lawfully obliged to provide a copy of all the tax filings to the Inland Revenue Service (IRS) and Social Security Administration (SSA). The last date for submitting the copies to both authorities is the same as handing over the tax filing to your employees i.e., January 31 of every year.
The Takeaway
If you are an architectural firm, simply learn to read and understand the above-mentioned accounting reports for architects. You will only be able to make well-informed decisions but also stay compliant with the lawful obligations set by the authorities.
