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The most beneficial activities an entrepreneur can do is learning how to read and understand their financial statements given to them by their Edmonton bookkeeping company. Into it, who are the makers of QuickBooks was able to survey a variety of small businesses and entrepreneurs to be able to quiz them on basic business financial literacy? They asked them questions about what is a balance sheet, what is the role of an income statement, how can they improve cash flow and water accruals. Out of all of the people that responded to the survey, 82% scored less than 70% on the test. This shows that many entrepreneurs lack basic business financial literacy. Helping entrepreneurs understand their interim financial statements can help them learn how to make better financial decisions, that can positively impact their business.

Entrepreneurs should understand what it means they are going to be getting when their Edmonton bookkeeping company says they are going to send interim financial statements. That means they are going to getting a balance sheet and income statement. They might also get an aging Accounts Receivable summary and an aging accounts payable summary, and while these can be very important for helping keep an entrepreneur organized on how much money their clients over them, and how much money they owe their vendors, the two most important reports are the balance sheet and the income statement.

The next thing that entrepreneurs should learn when they get these interim financial statements, is that there is an order at which they should review this information in to get the most information out of. By looking at the balance sheet first, can help entrepreneurs understand what the overall financial position of the business is because they will be the assets, liabilities, and equity of the business. If an entrepreneur sees that the assets are higher than the liabilities, that means their business is doing well, and how much higher it is can indicate exactly how well. If a business owner sees that the assets are increasing over liabilities month to month it means their business is growing.

However, the most important reason why entrepreneurs should look at their balance sheet first is to find any errors. They should request that they get their balance sheet from their Edmonton bookkeeping company and a six-month comparative statement. This is often called a vertical and it can help entrepreneurs see several months at a time to find out if there are any inconsistencies. Inconsistencies might show up because an entrepreneur had three payrolls in a month, which if an entrepreneur is paying their staff biweekly, is going to happen twice a year. Or it might mean that an entrepreneur bought a large asset in that month. Figuring out if there is a reason for these anomalies, or if there is no reason, it could indicate an error. By finding and fixing the error, and then looking at the income statement to see if the errors exist they are as well, entrepreneurs can verify the accuracy of these reports so that they can make even better financial decisions based on them.

One of the more beneficial activities that entrepreneurs can do in their business, is learning how to read the balance sheets and income statements prepared for them every month by their Edmonton bookkeeping company. The most important reason for this is because industry Canada says that half of all entrepreneurs fail within the first five years of opening their business, and 15% of all entrepreneurs close their business within the first year. By learning very quickly how to read those financial statements, to make better and informed, business decisions can significantly help entrepreneurs succeed in their business and beat the odds of half of the other entrepreneurs that fail in their business.

Once an entrepreneur has reviewed the balance sheet and fix any errors on that report as well as the income statement, then an entrepreneur should be comfortable enough to view their income statement. While the balance sheet is going to show an entrepreneur the overview of the business finances from a large standpoint, and shown entrepreneur how successful the business is, the income statement is going to be able to show entrepreneurs the health of that particular month in the business. The reason why it is important to have both sets of information is that if an entrepreneur sees an extremely poor income statement, as long as the balance sheet is positive, a business owner should not worry too much about it. They can work to ensure that that does not happen in the next month by increasing their revenue-generating activities. Or on the opposite end of the spectrum, if an entrepreneur sees that the income statement is very positive and the balance sheet is not, that might mean that the business owner’s recent marketing efforts are starting to succeed, and that can indicate to them that they need to continue or even increase those Edmonton Bookkeeping activities.

The next thing that an entrepreneur should look that when they are reviewing the income statement given to them by their Edmonton bookkeeping company, is that it should all fit on one page to be able to be easily read and understood. The expense categories should not be split into several different categories, to make them more consistent and easier to understand. The expenses will also be listed in a numerically dissenting order so that the highest expenses are at the top of the list. Examples of what usually ends up at the top of a balance sheet are rent and administrative salaries. If an entrepreneur is looking to minimize the expenses in their business, they should spend most of their time at the top of the list minimizing the largest expenses, because they will have the greatest impact on their bottom line. The items at the bottom of the list are typically bank fees and phone bills. And even if an entrepreneur can get all of those bills down to absolute zero, it is not going to have an extremely large impact on their bottom line.