Today you’re gonna understand business financial statements and why you need to value them for your business. Now there are numerous financial statements out there that accountants create. And most 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 total amount sheet income statement and statement of cash and that’s it just those three. Those will be the three that you might want to value as a small company owner.
You can either create them yourself or you could have your bookkeeper or your accountant take action for you however you must be doing it on a periodic basis if it be annually quarterly or what i will suggest especially initially is that you’re doing it monthly each month you must be looking at the financial statements in your organization to help you know how your organization is functioning and cut any type 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 each year then some might have been a concern or a problem for quite a while when you figure out that it’s going on and because each business is unique the numbers that the story in your organization informs you it will probably be unique is you must be looking at that on a regular basis monthly is what i will suggest to see what your organization is performing how it’s going what kind of sales you’re doing what kinda expenses you’ve got how is your cash looking and your Cash flow.
Are you currently profitable? You compare that to the previous period last month last quarter last year to see if you’re making improvements year over year or whether you’re going to the wrong direction and your businesses bleeding cash from month to month. If your organization is bleeding in cash from month to month then a Statement Cashflows is gonna tell you 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 long term Should be cash flow positive if you’re losing money you’re losing cash every month, if your cash is taking place each month or every other month your organization is gonna not exist it’s going to walk out business because your organization can’t function properly when you yourself have a reduction in cash flow from month to month to month Exactly the same with your Balance Sheet and your Income Statement.
Statement They’re all going to tell you different stories of your organization from an alternative perspective in an alternative picture There gonna give you whenever you look at them in total, in whole that three of these together the total amount sheet, the income statement and the statement of cash As a whole the picture which they explain to you is gonna be pretty accurate reflection of how your organization is performing and if it’s gonna survive and stay running a business for the long term or if your organization will probably be out of business, because you’re spending more cash than is coming in 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 the same thing. If you’ve got, you’re generating lots of sales but people aren’t paying their bills you’ve got a large level of receivables on your books then you’re going to walk out business because you can’t pay those bills because you do not have the cash.
It’s likely you have the income however not the cash So, you gotta look at them in conjunction all together all three pieces are critical elements to if your organization is functioning properly and once you figure out how to see those statements this really is straight forward the format is exactly the same month-to-month each month you get exactly the same format for all of them the big three financial statements and you will look at them and this really is quick to tell whether things are better or worse than these were in the earlier statement the previous period.