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Increasing their business financial literacy is extremely important for entrepreneurs says Edmonton bookkeeping. The biggest reason for that is because when entrepreneurs have a deeper understanding of their business finances, they will be better able to make decisions that can positively affect their business. One of the first things that entrepreneurs can do to impact this is to learn how to read their balance sheets. Their balance sheet can be an important tool in gauging the financial health of the business, and creating a plan of action on what an entrepreneur needs to do in order to succeed in business. 50% of entrepreneurs fail in business before their fifth year, and 29% of those failed entrepreneurs say that the reason why they failed is that they ran out of money in their business. Increasing financial literacy is an important way that business owners can avoid this.

One of the reasons why entrepreneurs do not read their balance sheet when they receive the interim financial statements from their Edmonton bookkeeping company is because they do not understand it. They then avoid it, or just use the income statement alone to make financial decisions that can end up causing problems. With a little bit of knowledge, entrepreneurs can learn what is on their balance sheet, and how they can use that information. One of the most important things that a balance sheet keeps track of is all of the assets that are currently in the corporation.

Business owners should understand that this does not just mean all of the money and bills that they are owed, while those are extremely important it also indicates all of the hard assets that the corporation owns as well. Anything that the business has purchased and used for business can be included in this section. If the corporation has purchased the building that it operates out of, any vehicles that have been purchased in order to conduct business with, and all equipment including computers. While entrepreneurs can put any assets that corporation owns in this section, a good rule of them to follow is that entrepreneurs should ensure that it has a useful lifespan of at least a year, and has a value of over a thousand dollars. Business owners can put smaller assets into the section, but it might be counterproductive and cause a business owner to spend a lot more time on a lot of much smaller assets.

Other assets that should be listed in the balance sheet are the Accounts Receivable, indicating all of the money that people and businesses over the corporation. Whatever products or services the company has produced and invoiced are listed here. Business owners should be aware of this amount, to be sure that it is not staying stagnant because I could be an indication that an entrepreneur is not successful in collecting on those invoices.

Edmonton bookkeeping says that this is important to learn so that business owners can not only understand what assets they have in the business, but make plans on how to collect a payment, and ensure that what they are owed is turned into cash in the bank.

Although entrepreneurs often get interim financial statements from their Edmonton bookkeeping company, they may either not review those statements, or are only looking at their income statement in order to make financial decisions. This would be a mistake because while the income statement will have great information on it, business owners should first look at their balance sheet and gain a complete understanding of the information on that before moving onto the income statement. If entrepreneurs are not following this order, they might be making poor financial decisions that could be negatively impacting their business.

The information that is on the balance sheet should give that an entrepreneur an overview of the financial situation of the business. The liabilities will help an entrepreneur understand how much money their corporation owes, and is very important to not only review, but to review on a regular basis and on a six-month comparative statement so they can see the liabilities over the past few months. Edmonton bookkeeping says that the liabilities that should be on the balance sheet include all of the bills that a corporation has received. This should include all of the vendors that an entrepreneur has purchased products or services through. Such as the materials that they need in order to generate the product that the business sells, as well as all of the various bills of the corporation including utility bills, phone, and Internet bills to name a few.

An entrepreneur should also see that the credit cards of the corporation are listed here as well says Edmonton bookkeeping. It is very important that entrepreneurs ensure that the only credit cards here are the credit cards of the corporation. Any entrepreneurs believe that they can put their personal credit cards on the balance sheet because they occasionally from time to time pay corporate expenses personally. While the recommendation is for entrepreneurs to never pay business expenses with a personal credit card, if this is something that has happened, instead of putting it on the balance sheet, an entrepreneur and should list in the shareholder’s own account instead. One of the reasons why it is extremely important for entrepreneurs to avoid co-mingling personal and business accounts is in case they get audited. Not only is it more difficult for entrepreneurs to track expenses when there co-mingling personal and business if Canada revenue agency sends them an audit request it could be significantly more time consuming and problematic to go through with every single one of the expenses personally and determine which is personal and which is business. By understanding the deeper level the balance sheet can help entrepreneurs ensure that they are able to make proactive business decisions that can help them grow their business. By doing this, Edmonton bookkeeping says that entrepreneurs can ensure that they are setting their business up for success.