If entrepreneurs are not able to understand the interim financial statements given to them by their Edmonton bookkeeping company, it may put them at a disadvantage for making informed financial decisions in their business. Intuit’s, the makers of QuickBooks surveyed entrepreneurs to find out how financially literate they were on their business finances. They asked participants of the quiz information such as what the role of their balance sheets are, accruals and how to improve their cash flow. Out of all of the participants that responded, 82% scored less than 70% on the test. A large problem is that entrepreneurs are not able to make informed financial decisions in their business.
By learning how to simply understand these interim financial statements can help entrepreneurs positively impact make positive financial decisions in their business. The first thing that entrepreneurs need to understand, is that there Edmonton bookkeeping company will give them their interim financial statements in the form of a balance sheet and income statement. They are going to receive these at minimum once a month, or often great Edmonton bookkeeping companies will give entrepreneurs these interim financial statements every two weeks so that they can review them before disbursing payroll.
It is a great habit for entrepreneurs to get into to review these financial statements before they make any financial decisions in their business so that they can see if their business can afford it or not. Doing this before running payroll can help entrepreneurs understand if they do not have money to run payroll, they can engage in some revenue-generating activities to ensure that they have money to pay their people. Learning how to read these financial statements is easy, business owners just need to do it consistently.
The very first thing that entrepreneurs should learn is by looking at the balance sheet first, can help business owners understand the financial position of their business by reviewing their profit and loss. The information on their financial balance sheet will include the assets of the business, the liabilities as well as the equity. By seeing what assets they have in their business compared liabilities can give entrepreneurs a good sense of how their business is doing financially. If it is doing well, the assets will be greater than their liabilities. If their business is not doing well, it may because their liabilities are more than their assets. By understanding this, business owners can have a base of knowledge for making future financial decisions in their business.
The next thing that entrepreneurs need to do is review their balance sheets for errors. It will be much easier for entrepreneurs to review their balance sheets and find errors than it is to do that on their income statement. By looking at a six-month comparative statement, entrepreneurs can see any inconsistencies or anomalies from one month to the next. If they are not able to explain the inconsistencies, this could indicate an error. Reasons why anomalies might be found on a balance sheet that does not indicate an error would be if the business is very seasonal and they had to hire a large number of seasonal workers that might show up as an anomaly, or if an entrepreneur made a large asset purchase.
Learning how to read the interim financial statements given to them by their Edmonton bookkeeping company, entrepreneurs can gain a special insight as to the financial health of their business, which can guide them to make great financial decisions in their business, if entrepreneurs do not use these interim financial statements to make informed financial decisions in their business, they could end up either putting their business at risk or just not growing your business in a way that they could if they had all of the facts.
The first thing that entrepreneurs need to understand is by reviewing the balance sheet first can give special insight into the overall finances, because the balance sheet will show the overall financial health of the business, whereas the income statement will show the current financial situation of the business. This is important to know because if an entrepreneur sees that the overall financial health of their business is extremely positive, having a poor month in an income statement should not be cause for concern. Edmonton bookkeeping also says that entrepreneurs can understand that if their balance sheet shows that their business is doing poorly, but their income statement shows that their business is doing well, that might be an indication that the entrepreneur’s marketing efforts are starting to pay off. Entrepreneurs must understand how to read both of these financial statements to gauge the overall health of their business.
Another way that entrepreneurs can review their financial statements to gain special insight about the overall financial health of their business, is if they look at the balance sheet given to them by their Edmonton bookkeeping company, and see that their cash is low as well as the Accounts Receivable is low, that might be an indication of a potential cash-flow problem. If an entrepreneur does not have a lot of Accounts Receivable coming into the business, they are going to have a hard time paying for their builds if their cash is also low. By seeing this in their balance sheet, entrepreneurs should act proactively to generate more revenue in their business or increase their marketing efforts. By doing this, entrepreneurs are going to be better able to avoid running out of business due to cash flow problems, but also be proactive in their business so that they can make informed financial decisions that can help them avoid problems in their business.
By learning how to review their interim financial statements from their Edmonton bookkeeping company, entrepreneurs will be able to grow their business and make informed and positive financial decisions in their business.