As a business owner, you cannot manage your business operations well without a basic understanding of financial accounting. Likewise, you also need to be well-versed about financial statements.
A financial statement is a formal record of your financial activities, it is a document from your financial service provider which clearly states your assets, liabilities, revenues and the overall financial position of your company. Indeed, financial statements are very important. But if you are still unconvinced, here are more ways to make better sense of the role of a financial statement in relation to your business:
1. Use your balance sheet to improve net worth
Your balance sheet shows the total value of your assets, liabilities and capital. Thus, you can use this particular financial statement to determine your net worth by the total value of assets minus the total liabilities so you could gauge how well your business is doing financially. If you think you still need to improve it, your balance sheet can also point out where you need to start. This is one important reason why you should keep a close eye on your financial statements.
2. Be more proactive in controlling your revenues
You can keep tabs on your cashflow through a cashflow forecast. In that regard, you can also use these financial statements to have a better idea of how to increase the amount of money coming into your business. This is where you can make good use of particular strategies to improve your revenues, especially if you think you are not meeting your breakeven point.
3. Have a better understanding of your cashflow
Aside from helping you monitor your cashflow, your cashflow forecast also provides a bigger picture when it comes to the overall status of your current funds. To that end, you can use these financial statements to get a better grasp of how much money is being spent on business expenses and how much money your business is earning. To have a positive and reliable cashflow, you need to make sure that the money coming into your business outweighs the money going out of your business.
4. Prioritize spending to improve your business finances
Used collectively, your financial statements work best in helping you make better sense of managing your cashflow. Through the use of these financial statements, you can easily discover the best ways to map out your business capital, paving way for better business finances.
You can use your financial statements in many ways. Beyond utilizing it for random business audits, it can also serve the purpose of guiding you in major business financial decisions.
Accurate and up-to-date financial statements are indispensable to your business. Contact us to learn more about advanced finance and accounting services.