The Entrepreneur In Heels

"It starts with an idea, that becomes a business, that becomes a success."

3 Financial Reports Every Business Owner Should Be Looking At

with one comment

No Business owner can make informed decisions without knowing the truth about their business.

When starting a new small business, many entrepreneurs find it difficult to determine which financial reports are important to have.  I’ve been asked the question by small business owners at different stages of their business. Startups need to make sure their business has a good foundation. Businesses in their second or third year need to evaluate how they’re doing and what needs to be changed. Financial reports play a huge part in a business running with accuracy, efficiency and effectiveness. There are many different reports that tell a business owner what the “financial” health of their company is.

Why Is Accounting So Important?

The primary function of accounting is to record  a company’s incoming and outgoing cash transactions. Record  keeping helps a business run efficiently and stay on top of where it stands financially. The three main benefits of good record keeping for  businesses is; taxes, expense tracking and document organization.

Taxes: Accurate accounting records makes preparing the company’s yearly tax returns go smooth and efficiently. Paying the proper taxes for your business is important. Hefty penalties can apply if your company’s taxes are not calculated properly.

Expense Tracking: Good accounting tracks the monthly expenses for a company.  Business owners can see where they are spending too much  money and where not enough is being spent in particular areas of their business.

Document Organization:  Having a good audit trail and documentation is vital to every business.  Good accounting keeps your financial records organized in date order and separated by function. It’s important that information is able to be retrieved quickly when needed.

Accounting is the hidden secret behind every successful business. A good marketing plan brings you customers.  A great work ethic keeps your customers. Good accounting sustains your business, and tells you where to go next.

Reports tell the brand’s story. Understand their language, understand your story and understand the story of everyone in your company. Understand your reports; understand the doors that are open and closed to you.

Here are three most important financial reports

1.  Balance Sheet – Shows the financial position of your company. This includes assets, liabilities, and owner’s equity.  Included in this report is your cash balance and your liabilities.

2. Income Statement – Shows the revenue, expenses, and the profit/loss of your company for a specific period of time. P&L is important because it gives you an idea how profitable the company is overall.

3. Cash-Flow StatementThis report is the most important report for small businesses and startups. The cash flow report allows you to see how readily a company can meet its debt and interest payments.

Financial reports tell the past, present and future of your business. The past is the decisions  you made in the beginning and how they affected your financial gain or loss. The present is the quick snapshot of what decisions you are making right now. The future is what you decide to do with the information these reports has given you.  How you use this information is the defining factor of your business growth or its demise.

Written by Beverly S. Davis

October 5, 2012 at 10:18 am

One Response

Subscribe to comments with RSS.

  1. Not every business owner is in business to become a Fortune 500 company; some small businesses exist largely to support the lifestyle desired by the owner, and to perhaps leave a legacy behind for the heirs. As with any investment strategy, a well thought out plan must be developed and followed in order for the entrepreneur to have a chance of reaching the desired outcome with the business. What is really difficult is getting that plan in place, and then monitoring progress and making adjustments over time. Business valuation – establishing the worth of the business – isn’t done based on data from a single point in time, it must capture historic performance data over several years of operation. Business value also takes into consideration whether or not there is a profitable future for the business given its current condition, based not just on historic information but on industry outlook as well as economic and competitive landscapes.

    Joanie Mann

    July 30, 2013 at 3:21 pm

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: