Is This Your Situation: Using Financial Reports to Manage Your Business
Your financial reports can be far more useful than just a report on the state of your business. You can use these reports to manage your business, diagnosis what’s going right and wrong, and set goals for how to grow and add to your bottom line.
What are financial reports?
Financial reports are issued at set intervals and go to shareholders, partners, investors and potential lenders. They describe your company’s financial strengths and weaknesses and typically contain the following:
- Balance sheet: includes a statement of liabilities, assets and business capital
- Income statement: reports on a company’s financial performance, how it gets revenue and how it incurs expenses
- Cash flow statement: shows how the changes in the balance sheet affect cash and cash equivalents that flow in and out of the company
Financial statements are essential to run your company on financial fact, not guesswork. Keeping these records thoroughly is the first step in running a successful business, being prepared at tax time to pay the IRS and accurately valuing your company should you decide to sell. Any lender or investor will want to see your financial report before deciding whether they want to invest in your business.
Although some companies generate their own financial statements, many turn to their accountant to formalize their statements according to GAAP, Generally Accepted Accounting Principles. It’s a smart move; here’s why.
Accountants can present your numbers so they are easy to read and understand.
If you’re a public company, accountants can provide audited financials that are certified by an independent entity.
Accountants can professionally format your numbers, give the statement a fancy cover and state that an independent accountant has accepted your numbers.
Hidden gold in financial statements
Financial statements are a great tool to help you answer questions about your company and to manage money and priorities. At a glance, these statements can help you determine critical expenses as well as evaluate whether your financial position is getting better or worse, whether your staff is contributing enough to the bottom line and whether you’re meeting set benchmarks.
We can help you compile and analyze your financial statements. Give us a call today so we can help you use financial statements as an additional tool for success.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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