One of the more important activities that an entrepreneur can learn in their business, is how to read the interim financial statements prepared by their Edmonton bookkeeping company. The reason why this is so important is that learning how to read the statements can help entrepreneurs make informed financial decisions in their business. Not only will it help them avoid problems, but it can help them be proactive in growing their business and increasing their revenue. By learning how to read these statements, they can increase their financial literacy and use that to their businesses benefit.
The two different financial statements that entrepreneurs are going to be able to get regularly are the balance sheet and income statements. Both are important and should be reviewed, but the most important and first financial statements that entrepreneurs should get into the habit of reading is the balance sheet. The information on the balance sheet will be the assets of the business and organized in order of liquidity. They will also have the business liabilities and equity, in that order. Entrepreneurs should redo the balance sheet first and get an idea of the financial position of their business. They will be able to easily see any anomalies or inconsistencies by looking at the balance sheet first, especially if they are looking at a six-month comparative statement prepared by their Edmonton bookkeeping company.
If an entrepreneur has been able to spot an inconsistency or an anomaly they should review their finances to see if there is any way that they can explain it. Examples could be if they purchased a piece of equipment, or hired a lot of seasonal staff for some time. If they are unable to explain the inconsistencies that they see on their balance sheet, they should then look for errors. By alerting their Edmonton bookkeeping company of potential air, they can fix the mistake on both the balance sheet and the income statement. Because typically, if there is an error on one there is an error on both.
Another reason why entrepreneurs need to look at their balance sheet is that it can help business owners find out if they are losing money due to a possible theft. The reason entrepreneurs can find this out is if they use their balance sheet to do a bank reconciliation and they see uncleared transactions, especially those uncleared transactions have been on the statement for more than a month, it might indicate that rather than waiting for those transactions to clear, that the money was stolen and it will never be deposited into the bank account. By reviewing their uncleared balances regularly, entrepreneurs can ensure that they are staying on top of any issues that might indicate a larger problem farther down the line.
By learning how to read their balance sheet, entrepreneurs will be in a great position to be able to catch errors, and potentially fix situations that need attention. When entrepreneurs can do this consistently, they can ensure the accuracy of their balance sheet from their Edmonton Bookkeeping company, that they can make better financial decisions in their business.
The interim financial statements prepared by the business owner’s Edmonton bookkeeping company can be an extremely important tool that entrepreneurs can use in their business to make important financial decisions. However, there only a powerful tool if entrepreneurs know how to read and understand them. Into it, the makers of QuickBooks did a financial literacy quiz and gave it to entrepreneurs to test their business financial literacy. 82% of the small business owners who responded a score of less than 70% on the test. Entrepreneurs who do not understand these interim financial statements are potentially putting their businesses at risk because they are unable to use these statements to make informed business decisions. Luckily, it is easy to learn and wants entrepreneurs can use these reports to affect their business, entrepreneurs can stand a better chance at succeeding in business.
The two financial statements that entrepreneurs are going to be able to see are the balance sheet and income statement. Entrepreneurs should read and understand the balance sheet first because that will be able to tell them the overall financial health of the business. The income statement, on the other hand, is going to help entrepreneurs see their expenses and what they can do to minimize those expenses. The first thing that they will notice is that there Edmonton bookkeeping company will have to organize the entire income statement to fit on a single page. The reason for this is that it can be easy to read and understand if the information is printed on a single page. If for some reason, the expenses do not all fit on that page, entrepreneurs might have split the expenses into too many different categories. Keeping the expense categories simple can allow entrepreneurs to be able to more easily see the expenses, and what they might need to do to minimize them.
Another thing that entrepreneurs will notice about their income statement, is that there Edmonton bookkeeping company will have organized the information in numerically descending order, with the most expensive items at the top of the list and the least impactful expenses at the bottom. Rent or mortgage of the business space and administrative staff are two examples of things that will be at the top of the expense list. Entrepreneurs will notice that the least impactful expenses will then fall to the bottom of the list for example bank fees and phone bills.
By spending their time minimizing the expenses on the top half of the list, entrepreneurs will be able to have the greatest return on investment by spending their time taking the biggest impact on the bottom line of their business. This way, entrepreneurs will not waste their time minimizing expenses that are going to greatly impact the overall financial health of their business.