Insider Secret #3: Selecting and Reviewing Financial Reports – Balance Sheet and Cash Flows Statements.
Continuing to ride the wave to enlightenment and understanding the financial position of your business, today’s insider secret covers Balance Sheet and Cash Flows Statements. Why should you review and work with these reports? To help you develop/refine an edge for your business!
Balance Sheet – provides information related to assets, liabilities and equity in your company, helping you understand what is owned, what is owed and what is left over. Managing your company’s balance sheet is one of the most important skills to master to succeed in business. Money in the bank can provide a false sense of security and may lead to bad decision making. Before you know it you have to borrow money from the bank to finance those wrong choices. By managing your balance sheet, more specifically keeping a close eye on your Accounts Receivables and Accounts Payable including all your growing liabilities, such as Harmonized Sales taxes and Corporate taxes, you’ll ensure better business decision making. Then the money you will borrow from the bank will be to grow your sales! The Balance Sheet can be formatted for detail or standardized view, in summary, with the previous year’s comparison and also in a net worth graph format. Now we are talking!
Statements of Cash Flows – complementing the balance sheet and income statement, Statements of Cash Flows focus on the cash that enters and exits the company during a period of time. This statement provides insight how and where to focus to maximize the cash entering the company and minimize the cash exiting. An important and helpful tool when forecasting future cash flow needs.
It takes a little time and a little practice, but once you become comfortable with reviewing your financial reports, you will see that they are a realistic report card for the health of your business. They can help provide early warning signs, even help provide a basis for future predictions for the company.
Our goal at The Art of Accounting is to not only provide outstanding service, but also provide the guidance our clients need to help run their business. Contact us today to see how we can help your business thrive.