Learning how to read the interim financial statements given to the weather Edmonton bookkeeping company can help entrepreneurs significantly in their business. Not only do many entrepreneurs lack basic business financial literacy, but they also tend to make significant financial decisions without looking at the facts. If entrepreneurs can learn how to read the balance sheet and income statements in their business, they can gain a deeper understanding of their business finances, and make informed financial decisions that can help them succeed in business.
The two different interim financial statements that they receive from the Edmonton bookkeeping company are the balance sheets and income statements. The balance sheet is going to show an entrepreneur the overall financial position of the business, while the income statement is going to help entrepreneurs understand what it has been in that current month. The two reports are extremely important, but they should know how to read them and in what order to read them first to get the best information from them.
The first thing that entrepreneurs should do is request the balance sheets be sent to them from their Edmonton bookkeeping company in a six-month comparative statement so that they can see several months at a time. The reason why is because this way entrepreneurs are better able to see any inconsistencies or anomalies that may exist in one month over another. Looking at them one month at a time might not show business owners very clearly if there are any inconsistencies. The next thing an entrepreneur should do is see if there are any explanations for those inconsistencies such as a large asset purchase and one month, or a huge payroll due to the seasonality of the business. If there is no explanation, entrepreneurs should look for errors to explain those inconsistencies, and then see if those errors exist on the income statement. Doing this can help entrepreneurs minimize errors in their interim financial statements. By having more accurate financial statements to make decisions off of, can increase the chances of making great financial decisions.
The next thing that an entrepreneur should be doing when they look at their balance sheets is looking at their assets versus liabilities. But they should be seeing is the assets being larger than their liabilities. And when looking for month-to-month they are going to want to see that those assets are grown over the liabilities. If not, entrepreneurs may want to increase their marketing activities were engaged in some more revenue-generating activities.
When entrepreneurs can review their balance sheets efficiently and effectively, they will be able to make great financial decisions that can help them proactively grow their business to either help them grow their business in a way that it is not, or keep their business grow so that they can become even more successful than they were before. By looking at this information carefully and thoughtfully from Edmonton bookkeeping, entrepreneurs will be able to significantly and positively impact their business.
If entrepreneurs want to know what the single thing that they can do to positively impact the finances of their business, it would be to learn how to understand the balance sheets and income statements sent to them every month from their Edmonton bookkeeping company. The information contained in these reports can help entrepreneurs not only understand the finances of their business, but help them make important financial decisions that can help them not only avoid making poor financial decisions but help them proactively make great decisions to help grow their business, increase their revenue and minimize expenses.
Once an entrepreneur has looked at their balance sheet first and verified that there are no errors, or that the errors have been fixed, as well as figured out what the overall financial position of the business is the next thing an entrepreneur should do is review the income statement prepared by their Edmonton bookkeeping company. They should see that on this income statement they will notice of disposition for revenue, the cost of goods sold and the expenses. It should all fit on one page to be very easy to read and understand. Entrepreneurs may try to categorize their expenses and extremely specific categories to be very clear. For example, they may have their office supplies split out into several different categories of office supplies such as various paper, various pens, bathroom supplies. However, to make it extremely clear on the income statement, business owners should verify that they are simplifying those expense categories. For example, having all of those office supplies under the general expense category of office supplies.
The next thing entrepreneurs will notice about their income statement is that their expenses will be in numerically descending order, which means the highest expenses are going to be at the top of the list. The reason for this is so that entrepreneurs can easily look at the list and see that the top half of it will have the highest expenses in the business. If an entrepreneur wants to minimize expenses in their business, they should minimize the expenses that are at the top of the list to have the largest return on investment. The bottom of the list will have the least impactful expenses, and well entrepreneurs are not going to want to spend a lot of extra money in their expense categories, trying to minimize the lowest expenses is not going to have a great effect on entrepreneurs’ bottom line.
By learning how to minimize expenses and what to minimize first, can help entrepreneurs keep the expenses of their business low, which can help the profit of their business stay up, and impact the asset section and minimize liability section on their balance sheet. By doing this, entrepreneurs can be proactive in learning how to run a financially efficient business and increase their chances of succeeding.