It is not just enough for entrepreneurs to review the interim financial statements given to them by their Edmonton bookkeeping company, but entrepreneurs need to understand how to review them as well as how to use that information to make financial decisions in their business. Industry Canada says that half of all entrepreneurs fail in business before their fifth year, and those businesses that do fail, 29% of them say that the reason why he failed was that their business ran out of money. Making informed financial decisions cannot only positively impact an entrepreneur’s business, but help them avoid cash flow problems that end up causing their business to fail.

One of the first things that entrepreneurs should learn when receiving those interim financial statements from their Edmonton bookkeeping company is that they will be receiving two reports, one is a balance sheet and the other one is and income statement. While both of these reports are extremely important, business owners should get into the habit of reviewing their balance sheet first. Many entrepreneurs can more easily read and understand the income statement and are already in the habit of looking at that report only to make financial decisions. They should rethink this strategy because the balance sheet will give an entrepreneur a better overview of the overall finances of the business, as well as help entrepreneurs to see if there are any mistakes in these interim financial statements. Since any interim financial statements not prepared by an accountant have the potential to have more errors, entrepreneurs should be doing what they can to minimize those errors before using them to make financial decisions.

How an entrepreneur will be able to catch errors on their balance sheet from their Edmonton bookkeeping company, is by looking at them in a six-month comparative statement. It can easily request that format from their Edmonton bookkeeping company, and that can allow entrepreneurs to more easily see any inconsistencies in one month over another. This is not as possible to do when only looking at a single month at a time. If there is no explanation for the inconsistencies such as having three payrolls in a single month or purchasing large assets in one month, then this can cause an entrepreneur to look into it to see if it is an error. If it is an error, then entrepreneurs should see if it is carried over to the income statement.

By reviewing their interim financial statements and knowing how to verify and avoid errors, can help entrepreneurs have better tools to make financial decisions with. Getting into the habit of doing this regularly can help entrepreneurs not only avoid financial problems but actively make changes in their business to grow their business and increase their revenue. This is extremely important and can help entrepreneurs succeed in business, over entrepreneurs that are not making informed financial decisions in their business.

One of the most important activities that an entrepreneur can do to positively impact their finances in their business, is by reviewing the financial statements given to them by their Edmonton bookkeeping company. When entrepreneurs do not make informed financial decisions, they could be putting their business at risk, or at the very least not be making decisions that positively impact their business either. They should get into the habit of reviewing these interim financial statements every month as they receive them to understand the finances of their business so that they can make the best and most informed decisions possible.

By learning how to review their balance sheets to minimize errors, there are other reasons why entrepreneurs should be looking at the balance sheet first. It is going to help entrepreneurs understand the financial position of their business and see a list of all of their assets next to their liabilities. They should check this regularly to verify that their assets are more abundant than their liabilities. If this starts to shift, entrepreneurs can be proactive in their decision to increase the revenue in their business, increase their marketing efforts and minimize expenses. By knowing what to look for on their balance sheet from their Edmonton bookkeeping company, can help entrepreneurs be proactive in their business.

Another reason that entrepreneurs should be reviewing their balance sheet from their Edmonton bookkeeping company regularly, is because it can indicate to entrepreneurs if they are looking at a future cash flow problem. How they can determine that, is by looking at the asset section of their balance sheet. If the cash is low as well as the Accounts Receivable section is low, that might indicate that not only does an entrepreneur have no invoices that are going to be paid, which means not a lot of money coming into the business, but if the cash is also low, then business owner might not have the funds to pay for their business expenses. By seeing this early on by reviewing their balance sheet, entrepreneurs can be proactive in increasing that cash flow, either by engaging in some revenue-generating activities, obtaining financing from a bank, or by contributing their money to the business to avoid running out of money in their business.

Balance sheets can also help entrepreneurs do bank reconciliations. Entrepreneurs should also get into the habit of doing this before they disburse any payments including running payroll. This can help business owners see if they have the money in their business to make those payments, and if not what they can do to increase the revenue in their business so that they can make those payments. However, if an entrepreneur does a bank reconciliation and sees that they have many uncleared transactions that have persisted for several months, that could indicate an error. By looking to see if that transaction was duplicated or had a date error, business owners can either get rid of the uncleared transaction, but if there are no errors it might indicate that those payments were stolen so entrepreneurs need to look into why those transactions are uncleared.