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Business owners can greatly improve their financial decisions simply by being able to understand the interim financial statements given to them by their Edmonton bookkeeping company. Business owners often get into business ownership, because there are extremely good at delivering the products or services that their business is known for. That does not necessarily mean that they are great at running a business, and there is often a steep learning curve. One of the things that entrepreneurs should learn early on their business, is that by being able to understand the interim financial statements that they receive, can significantly impact the financial decisions they make in their business.

The two different types of financial statements they will get from their Edmonton bookkeeping company are the balance sheets and income statements. They should be receiving these once a month, or some companies will send them out to entrepreneurs every two weeks so that entrepreneurs can review the information before disbursing payments or running payroll. This is very powerful because that allows entrepreneurs to understand their business finances and if they can afford to run payroll, and if they cannot, what they need to do to bring enough money to afford it.

When entrepreneurs are learning how to review those financial statements, the order that they review them in is important. They should be looking at the balance sheet of their business first because it will help entrepreneurs understand what the financial position of their business is. They will be able to see the profit and loss first but also see if there are any anomalies at a six-month comparative statement. Any interim financial statements that are not prepared by an accountant tend to have errors on them, so if entrepreneurs can get into the habit of reviewing the statements for errors that they receive from their Edmonton bookkeeping company, they will be able to ensure that the financial decisions they make from the statements will be as good as possible.

How entrepreneurs can ensure that those balance sheets do not have any errors on them, is by looking at the six-month comparative statement so that they can view several months at a time and see if there are any inconsistencies. Inconsistencies might be an indication of some unusual circumstances such as when an entrepreneur makes a large asset purchase that month. But if there is no explanation, entrepreneurs should look for errors. This way, when entrepreneurs make decisions based on the information, their taking into consideration any potential errors, that will just increase the ability to make positive financial decisions.

It can be very simple for entrepreneurs to learn how to read the interim financial statements and the balance sheets that they get every month, to make positive financial decisions in their business. By doing this, entrepreneurs can get into the habit of making decisions based on their finances that can help them avoid issues also grow their business.

When entrepreneurs financial decisions in their business without consulting the interim financial statements given to them by their Edmonton bookkeeping company, they may be putting their business at risk. Industry Canada says that half of all Canadian entrepreneurs fail in the first five years of business ownership. When asked, these failed entrepreneurs said the reason why their business failed was that they ran out of money in their business. By learning how to read their balance sheets and income statements, entrepreneurs can positively impact the finances of their business, and increase the odds of succeeding.

There Edmonton bookkeeping company will give them balance sheets and income statements every month. Business owners should review those statements every single month to help them understand their business finances. For example, an entrepreneur can review their balance sheet to discover if they have a cash flow problem or if they are going to have a cash flow problem. The way they do that is that there Edmonton bookkeeping company will list the assets in their business in order of liquidity. The cash will be at the top of the list and the Accounts Receivable will be in there as well. If their cash is low and so as their Accounts Receivable, that could indicate to an entrepreneur that they are going to have a cash flow problem. Not having money scheduled to come into the business in the future is something that business owners should take note of. They can either engage in some revenue-generating activities or obtain financing to avoid running out of money.

Also, entrepreneurs should be looking into their income statements and understanding them so that they can understand what they can do to increase their profits and minimize expenses in their business. There Edmonton bookkeeping company should the organizing their income statement in numerically dissenting order the highest expenses listed at the top of the list, and the smallest expenses at the bottom. The reason this is important is so that entrepreneurs can easily review the list to see the largest expenses in the business. By spending time minimizing the expenses that are closer to the top of the list can ensure that a business owner has the greatest impact on their business’s bottom line. Many entrepreneurs try to minimize expenses by saving on utility costs, phone bills or bank fees, and while they mustn’t be spending a lot of extra money in these areas, business owners should be mindful of how much time their spending minimizing these costs, as it is not going to greatly impact the businesses bottom line.

Entrepreneurs need to learn not only that they should be reviewing their interim financial statements, but how they should review them, and how they can use that information to make financial decisions in their business. Once they get into this habit, they can consistently ensure that they are making positive financial decisions in their business to help their business to continue to grow.