Most small business owners check their bank balance and think they know how their business is doing. But your bank balance doesn't tell you about unpaid invoices, upcoming tax bills, or whether last month was actually profitable. These 5 reports — all available in Xero — give you the full picture.
1. Profit & Loss (Income Statement)
What it shows: Revenue minus expenses for a specific period. The bottom line is your net profit (or loss).
What to look for:
- Gross margin trend: Is your margin improving or shrinking month-on-month?
- Expense categories growing faster than revenue: A warning sign that costs are out of control.
- One-off items: A big expense this month (insurance renewal, equipment purchase) may distort the picture. Compare with the same month last year.
Frequency: Monthly. Compare to prior month and same month last year.
2. Balance Sheet
What it shows: A snapshot of what your business owns (assets), owes (liabilities), and is worth (equity) at a point in time.
What to look for:
- Current ratio: Current assets ÷ Current liabilities. Above 1.5 is healthy; below 1.0 means you may struggle to pay short-term debts.
- Growing receivables: If your debtors are increasing faster than revenue, customers are paying slower.
- Loan balances: Are you paying down debt, or is it growing?
Frequency: Monthly or quarterly.
3. Cash Flow Statement
What it shows: Where cash came from and where it went, split into operating, investing, and financing activities.
What to look for:
- Operating cash flow should be positive: If your day-to-day operations aren't generating cash, the business model needs attention.
- Difference between profit and cash: A profitable month with negative cash flow means cash is tied up in receivables or inventory.
Frequency: Monthly.
4. Aged Receivables
What it shows: Who owes you money and how overdue each invoice is (current, 30 days, 60 days, 90+ days).
What to look for:
- Anything over 30 days: Follow up immediately.
- Repeat offenders: Customers who are consistently late should be put on stricter payment terms or COD.
- Large concentrations: If one customer represents 50%+ of your receivables, that's a risk.
Frequency: Weekly.
5. BAS Summary / GST Report
What it shows: Your GST collected (on sales) vs GST paid (on purchases), and your PAYG instalment obligation.
What to look for:
- GST payable amount: This is cash you need to have ready by the BAS due date. No surprises.
- Input credits you might have missed: Check that all supplier invoices with GST have been entered.
- PAYG instalment amount: If your income has dropped, consider varying this down to preserve cash flow.
Frequency: Quarterly (aligned with BAS lodgment).
Key Takeaways
- Review your P&L monthly — compare to prior month and same month last year.
- Check your Balance Sheet current ratio — below 1.0 is a warning sign.
- Operating cash flow should be positive — profit doesn't equal cash.
- Review Aged Receivables weekly — chase anything over 30 days immediately.
- Check your BAS summary quarterly to avoid GST payment surprises.