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Does your business need Financial Statements? YES! Check here why.

11/21/2022

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As you run your business you plan and act daily! How to see the results of these decisions? By reviweing your Financial Statements.

Your business numbers give you a picture of the past operations, but can also help you predict where you are going, and most importantly, correct behaviors to change the results.

What are the most typical Financial reports you need to review with your bookkeeper/accountant?
✔Balance Sheet
✔Profit & Loss
✔Cash Flow
✔Accounts Payable Reports
✔Accounts Receivable Reports

Don't panic. Here is more information about these staments:
  • Balance Sheet: is a statement of a business's assets, liabilities, and owner's equity as of any given date. A balance sheet gives you a snapshot of your company's financial position at a given point in time. It gives you information on the business resources (assets) and its sources of capital (equity and debt) at a specific point in time.
  • Profit and Loss: According to Investopedia, “a profit and loss statement is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year.”. This report is also known as Income Statement and give information regarding the business "results", or the capacity that your business have to create profits, during a specific perior of time, not at a point in time. 
  • Cash Flow: this report shows the real movement of your money, what actually happened to your "cash"  during a specific period. It compile all the inflows (sales, collected funds, loans, all the money in) and the outflows (expenses, loan payments, payment od debts, all the money out) This report can show your business' liquidiy position.
These 3 Financial Statmenets will help business owners evaluate their company's financial standing.

  • Accounts Payable Reports: this report includes all your debt. It helps you track all business expenses to ensure accurate financial data, and more importantly, when you have to pay them. This report shows your overdue balance to vendors. 
  • Accounts Receivable Reports: this report provides information on outstanding sales, bad debt, etc at a specific period in time. How much money is owed to you.

The Bottom Line? Financial Statements are a really important tool to manage your business. Why? Beacuse by knowing your numbers you can:

✔Make better investment decisions.
✔Know the financial structure, the company's growth capacity, its stability and profitability.
✔Evaluate the solvency and liquidity of the company and its ability to generate funds.
✔Guarantee suppliers and creditors fair compensation for their investment or allocation of resources or credits.
✔Diagnose the company's ability to generate income from its operating activities.
✔Identify the financial resources of the organization.
✔Show the results of resource management performed by administrators.

Ready to learn more? Comment with your questions.

Photo by Myriam Jessier on Unsplash
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    Author

    Dayani Castro, was born in Cuba, and is a proud Canadian citizen who pay her fare share on taxes and likes to contribute to the economy.

    In her own words: "I am from Cuba, moved to Canada 10 years ago with my daughter and we love it here. Won't go into politics but I took the decision to up-root my family to find better opportunities for my daughter to become a powerful and an independent woman. I open my bookkeeping and tax business 5 years ago, and love helping immigrants - specially women - navigate the process of creating and growing their business. As a single mom, immigrant an entrepreneur I recognize the importance of a supporting and loyal community when you need to start from Zero and build your dreams in your new country."

    Dayani's vision is to help as many immigrants as possible to create thriving business, giving them the opportunity to be independent, give back to the society and create new jobs.

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