As the new financial year approaches, now is the perfect time to review your business and check on its ongoing health. Some questions to consider include how we are performing, where are our profits coming from and where is our money going to. But why does this matter?
We understand many small businesses and their hard-working owners, do not have the time or inclination to fully understand the finer points of how accounting works.
However, the benefits that can be gained through understanding a few key concepts within your financial statements cannot be underestimated. A basic financial literacy will enable you to interpret important information regarding whether you are thriving as a business, or if it is time to make a change.
The support from a strong business services team who have expertise and experience, as well as access to the best accounting software, is the first step in taking care of all the tricky stuff.
We can assist by looking at key business drivers and keeping a track of the changes over time. This benchmarking can help you ensure that you develop the right strategies to continue on your path towards your goals.
Check Your Business Health With These 3 Financial Reports
1. Cash Flow
Your business cash flow is a valuable measure in determining the health of your business. A cash flow statement measures of strength, profitability, and the long-term future outlook for a business.
2. Profit and Loss
A profit and loss report shows the profitability of your business over a specific period. It summarizes the total income and total expenses of a business and is a useful tool for monitoring business activity and comparing to prior periods. The P&L provides an overview of the financial health of the business.
3. Balance Sheet
A balance sheet is a financial statement that summarises a business’ assets, liabilities and equity at a specific point in time. It is a financial statement that provides a snapshot of what a business owns and owes.
Why is this so important?
Every business owner should familiarise themselves with their financial statements in order to monitor your business’ health and performance. This information is critical to conducting financial analysis and truly understanding whether you are on the right path or if you need to reevaluate your actions.
If you would like to learn more about how you can monitor the health of your business and ensure you reach your goals, then get in touch with MBC, where we work on your business to make sure it is working for you.