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The reason why entrepreneurs need to be able to completely understand all of the financial statements that they receive from their Edmonton bookkeeping company is because they will be able to make better financial decisions in their business if they learn that. The company that made the accounting software QuickBooks, and two it surveyed small business owners to find out what their basic business financial literacy was. Examples of questions that they asked were what is a balance sheet, it is the role of an income statement, what are accruals, and how can entrepreneurs improve their cash flow. 82% of all of the respondents to the quiz scored less than 70%.

The first thing that entrepreneurs should understand when they get their interim financial statements from their Edmonton bookkeeping company, is that they should be receiving those at a very minimum once a month. Great bookkeeping companies like always bookkeeping send the interim financial statements to their clients every two weeks. The reason they do this is so that their business owners can use the information before they run payroll. Since most entrepreneurs pay their staff every two weeks, having updated interim financial statements before making those payments can be extremely beneficial.

The next thing that an entrepreneur should understand is those financial statements should come in the form of balance sheets and income statements. They may also receive an aging Accounts Receivable summary or an aging account summary which can help entrepreneurs stay organized with what invoices they have to pay, and what clients over the money. But the two most important are the balance sheet and the income statement. The next thing that entrepreneurs should learn is that they should review the balance sheet first to fix any potential errors that exist in the report. They will do that by asking their Edmonton bookkeeping company to give them a six-month comparative statement to be able to view several months at a time to be able to see any inconsistencies from one month to the next. If there are inconsistencies, entrepreneurs should find out why. Perhaps that was the month they had a large asset purchase, or it was the month after their busy period, which is why their sales were so low. If there is no explanation an entrepreneur can give as to why that month may have been low, then it might indicate that there is an error that an entrepreneur needs to fix. Once they find the error, they should look at their income statement to ensure that the error does not exist there too and if so they can fix it.

Understanding what it is they get, how often they get them and ensuring the accuracy of the information is the first great step that entrepreneurs need to take to understand their interim financial statements that they receive at least once a month.

Entrepreneurs must learn how to read their interim financial statements from their Edmonton bookkeeping company so that they can avoid making poor financial decisions, and avoid situations that could cause their avoidable business harm. Industry Canada says that 15% of all entrepreneurs fail within the first year of operating their business. 30% have failed by year two, and 50% of all entrepreneurs have failed by their fifth year in business. When surveyed, the 29% of these failed entrepreneurs said that the reason why they failed was that they ran out of money in their business. Learning how to read their interim financial statements can significantly impact this statistic and help entrepreneurs to succeed where they might not have otherwise.

Once an entrepreneur has verified the accuracy of the information, they should then look at the balance sheet because this is going to tell entrepreneurs what the overall financial position of their business is. The be able to tell the profit and loss. There are three parts to their balance sheet and they are the assets, liabilities, and equity of the business. Entrepreneurs should be paying attention to the assets, and seeing how they are in comparison to the liabilities. An entrepreneur is going to want to see the assets in greater abundance than their liabilities. And when they review the six-month comparative statement, they are going to want to see the Edmonton Bookkeeping assets growing as well.

The next thing that there going to want to do is look at their assets on the balance sheet to determine if they are predicting a future cash flow problem. The way an entrepreneur is going to be able to tell this is if there Accounts Receivable as well as their cash in their asset section are both low. While an entrepreneur is not going to want to see their Accounts Receivable stay high for a long period, a very low Accounts Receivable also might indicate to an entrepreneur that they are not going to be having money coming back into the business. If this is the case, it could indicate a potential cash-flow problem. By not having cash in their business and not having invoices that are going to be paid, a business owner should work to be proactive to ensure that they do not run out of money in their business. They can increase revenue through revenue-generating activities like increasing their marketing efforts. But they also might need to obtain financing from a financial institution, or put to personal money into the business. If business owners do not see this coming, it could potentially cause them to run out of money in their business and have to close their doors. This is how my understanding of their interim financial statements from their Edmonton bookkeeping company can help entrepreneurs be proactive in their business to increase their business and avoid financial problems.