Today you’re gonna learn about business financial statements and why you will need to worry about them for the business. Now there are lots of financial statements on the market that accountants create. And all of the big corporations that report their numbers to Wall Street have additional as the SEC requires them, but we as small business owners for people really there’s only three. Three big financial statements that people care about. The big three the balance sheet income statement and statement of cash and that’s it really those three. Those are the three that you might want to worry about as your small business owner.
You are able to either create them yourself or you could have your bookkeeper or your accountant do it for you however you have to be doing it on a periodic basis whether it be annually quarterly or what i would suggest especially initially is that you’re doing it monthly every single month you have to be taking a look at the financial statements in your organization to help you know how your organization is functioning and cut any kind of issues or problems, nip them right in the bud early In the event that you watch for a whole year and only review your financial statements every single year then some might have been a problem or even a problem for quite a long time when you find out that it’s going on and because every single business is exclusive the numbers that the story in your organization tells you it will probably be unique is well you have to be taking a look at that on a regular basis monthly is what i would suggest to see what your organization is doing how it’s going what kind of sales you’re doing what kinda expenses you’ve got how is your cash looking and your Cashflow.
Have you been profitable? You compare that to the prior period last month last quarter last year to see if you’re making improvements year over year or whether you’re planning to the incorrect direction and your businesses bleeding cash from month to month. If your organization is bleeding in cash from month to month then the Statement Cashflows is gonna let you know that. It’s going to tell you what’s going on with your organization and if you’re cash flow positive which any business that’s gonna succeed over the future Must be cash flow positive if you’re losing money you’re losing cash every month, if your cash is going down every single month or every other month your organization is gonna not exist it’s planning to go out of business because your organization can’t function properly if you have a decrease in cash flow from month to month to month The same with your Balance Sheet and your Income Statement.
They’re all going to tell you different stories of your organization from a different perspective in a different picture There gonna offer you whenever you look at them altogether, in whole that three of these together the balance sheet, the income statement and the statement of cash As a whole the picture which they demonstrate is gonna be pretty accurate reflection of how your organization is doing and if it’s gonna survive and stay in operation for the future or if your organization will probably be out of business, because you’re spending more cash than is arriving or you’ve got higher expenses than your income is coming in.
Now I am aware those sound kinda similar but they’re not. Income and cash and not similar thing. If you’ve got, you’re generating lots of sales but people aren’t paying their bills you’ve got a huge level of receivables on your own books then you’re planning to go out of business when you can’t pay those bills because there isn’t the cash. It’s likely you have the income although not the money So, you gotta look at them in conjunction as a whole all three pieces are critical elements to if your organization is functioning properly and as soon as you work out how to read those statements this really is straight forward the format is the exact same month-to-month every single month you receive the exact same format for each of them the big three financial statements and you can look at them and this really is quick to tell whether things are better or worse than these were in the last statement the prior period.