Financial statements are a key factor for any business to succeed, leading to better decision-making, greater financial success, and improved business clarity. Running regular financial reporting allows you to better manage and understand the financial health of your business, giving you a clear picture of your company’s current position so you can make informed decisions about the future.
In this blog post, we’ll outline the three key financial statements and reports every business owner should be running to achieve long-term growth and success.
Gaining business clarity with regular financial reporting
Financial reporting provides an objective snapshot of how well your business is performing in relation to its goals, allowing you to identify areas that need improvement and make changes when necessary. By running regular financial reports, you can ensure that your business is on track towards achieving its goals and gain greater clarity when it comes to making important decisions.
The three major financial statements - Profit and Loss, Balance Sheet, and Cash Flow Statement - are the core components of this process. They work together to provide a comprehensive overview of the company’s financial health and help you identify key trends and areas for improvement.
Profit & Loss Statment (a.k.a Income Statement)
A Profit & Loss Statement (P&L) is a financial statement that shows the revenue, expenses, and profit or loss of a business over a specific period of time. It is used to measure the performance of the business and to determine whether it is making or losing money.
The P&L Statement is an important financial statement for business owners, as it provides insight into how well the business is doing financially and can be used to make informed decisions about future investments or strategies.
Business owners should run their P&L Statements at least once a month to keep track of their finances and ensure they are on track with their goals.
The Balance Sheet is a financial statement that provides a snapshot of what a company owns and owes, and the amount invested by shareholders. It is used to measure the financial health of a business and can be used to make decisions about investments, loans, and other financial matters.
A Balance Sheet provides a snapshot of a business's financial position at a specific point in time. It includes assets, liabilities, and equity. Assets are what the business owns, such as cash, inventory, and equipment. Liabilities are what the business owes, such as loans and bills. Equity is the difference between assets and liabilities and represents the value of the business.
The Balance Sheet is an important financial statement for business owners because it provides insight into the current state of their finances. It can also be used to compare performance over time and identify areas where improvements can be made.
As a business owner, you should run a Balance Sheet at least once per year in order to get an accurate picture of your company’s financial position. This will help you make informed decisions about your business and ensure that you are making sound investments.
Cash Flow Statement
A Cash Flow Statement is an important financial statement for business owners as it provides a snapshot of the company’s cash position. It shows how much cash is coming in and going out of the business, and helps identify any potential cash flow problems.
By running regular cash flow statements, business owners can identify areas where they can cut costs or increase revenue, allowing them to make more informed decisions about the future of their business. Moreover, regular cash flow statements provide a clear picture of the business's financial health over time, which can be useful for investors or lenders who may be considering providing funds to the business.
The Cash Flow Statement should be run on a regular basis, typically at least once a month. This allows business owners to keep track of their cash position and make sure that they are managing their cash effectively. By running the statement regularly, they can identify any potential issues before they become serious problems.
Overall, the Cash Flow Statement is an essential tool for business owners as it helps them to understand their current financial situation and make informed decisions about their future cash management strategies.
The power trio: how regular financial reporting can help your business thrive
Financial reporting is a crucial part of building any successful business. The Cash Flow Statement, P&L and Balance Sheet provide invaluable insights that aid in better decision-making, greater financial success, and improved business clarity. Running regular financial reports can help business owners make informed decisions and adjust their strategies to better grow their business.
By keeping on top of the numbers with these three major financial statements, business owners can make informed decisions about their finances and stay on track for achieving their goals.