Need a pick me up?
If you’re having a terrible, awful kinda day – I know just the phrase that will cheer you up. Ready for it? Here it is:
Financial Statements.
What? That didn’t do anything for you?
I get it. Financial statements might not sound as exciting as the latest superhero movie (it is possible they are more exciting than some superhero movies LOL), but trust me, these little reports are like your business’s superpower 🦸♂️! They give you a peek into your business’s financial health which helps you make smart decisions for the future.
What the corn are financial statements anyway?
Think of financial statements as a report card for your business 📊. They sum up how your business is doing over a certain period, like a few months, a whole year, or multiple years – you get the idea.
You’ve got three main types to keep an eye on (there are more, but we’ll focus on these): the balance sheet, the income statement, and the cash flow statement. Let’s break them down!
1.) Balance Sheet: Your Business’s Snapshot 📸
The balance sheet is like a big-picture photo of your business’s finances. It shows three important things: what your business owns (assets), what it owes (liabilities), and what’s left over (shareholder equity or capital). When you add all this up, you get the value of your business at that point in time. It’s like knowing how much your superhero gear is worth!
2.) Income Statement: The Profit Detective 🕵️♀️
It is also known as the Profit and Loss or P&L for short (because who has time to say Income Statement OR Profit and Loss, right?). This one’s all about figuring out if your business is making money or losing it. And let me tell you, our first business failed because we had NO idea we were making less than we were spending; it’s not a fun fact to find out two years in.
The P&L sums up your revenue and expenses over a period, showing you if you’re in the green (yay, profit!) or the red (uh-oh, loss). It’s like your business’s detective, helping you see where the money’s going and if you need to make any changes.
3.) Cash Flow Statement: The Money Mover 💰
The Cash Flow statement is all about…you guessed it, the cash. More specifically, how it flows in and out of your business. This report combines info from the Balance Sheet and the P&L for a clearer understanding of your biz finances.
EXAMPLE: you can’t see funds paid towards a loan or taken as owner draws on the P&L, but you can on the Balance Sheet. The Cash Flow statement combines key info to get a more complete picture.
It shows if you’ve got enough dough to keep things running, pay your team, cover bills, and maybe even invest in some cool new opportunities 🤑. This report helps:
- you see if your business is financially solid or if you need to make some tweaks to keep the cash flowing smoothly
- explain why your biz bank account doesn’t always reflect the income you see on your P&L
Why should you care about these financial statements?
Understanding these statements isn’t just for big-time investors or financial gurus. As a small business owner, knowing what’s going on with your finances is 100% vital to steering your business in the right direction. It’s like having a superpower that helps you make awesome decisions and keep your business flying high 🚀!
If you ever need financing to grow your business, the bank will want to see these reports.
I already hear that next question, “Amanda, how do I make sure I have all this amazing information at my fingertips?”
The simple answer: solid, accurate, and consistent bookkeeping. It really is the only way. Also, be sure to include each of these reports in your monthly bookkeeping routine.
The not-so-simple part is making sure your bookkeeping is solid, accurate, and consistent. Please don’t do it yourself if at all possible; find a reputable bookkeeper who understands your industry. They will be a huge help in making sure you have the information you need to make good decisions and be ready for tax time.
We’ve got your back if you don’t have a professional bookkeeper or need a second opinion! Drop us a line on our contact page OR schedule a call using the button below 👇
Ready for a helping hand? Nab your FREE, 30-minute strategy session today!
Amanda Wylie – Certified QuickBooks Online ProAdvisor
Owner/CEO
I love the Lord and live way out in the country with my wonderful husband and my 8 children still at home. Besides everything bookkeeping, my passions and interests include gardening, chickens, herbal remedies, coffee and learning new things!
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