Whether you own a small business or run a big restaurant chain, you need to keep track of your budget. One way to do so is by producing a financial statement. With a little analysis and accounting, you will be able to figure out how well you are doing financially. You can determine if you have enough to continue your business ventures.
A financial statement is a numerical document that communicates to its reader the financial records of a company. All sorts of business firms must have this prepared. Financial statements include three elements in its process, balance sheet, income statement, and cash flow statement.
According to an article by Forbes, tracking trends through financial statements can help you see where your business is going. That is why you must be able to create accurate notes of your finances.
One way to make your financial statement a more convenient process is by putting your expenses into categories. That way, you can have an easy time putting them in a proper format later on. Like taking an inventory, you can list out the money you spend on wages, rent, and insurance for starters.
To come up with your financial statement, you need to understand what balance sheet, income statement, and cash flow statement are. A balance sheet allows you to know how much money you have through your company if you sold it and paid the debts your company has. An income statement refers to how much revenue your company made in a project or a specific amount of time. The cash flow statement is about where the company’s money goes.
Organize your financial statement to make it easy to read. Having the numbers next to each other can be confusing to look through. You can use a spreadsheet-style format to put the numbers in an organized manner. It will save everyone a lot of trouble if you keep it organized.
When you are doing the math for each aspect of your finances, always take time to make sure you got the numbers right. Handling money is a serious matter, so take equal care towards it. If you get one digit wrong, it can lead to your future calculations going wrong. So don’t rush and take your time when you reach this part in making your financial statement.
An income statement gives an overview of all the expenses, net income, revenues, earnings, etc. It covers the data of more than a particular month, often prepared on an annual basis.
Stockholders, owners, and investors of corporations need financial information to be able to make informed business plans on what to do with their investments. That is why they are usually the ones who take a look at financial statements.
When you see your financial statements, you will make an informed decision on what to do next. Whether you’ve gained more income or need to improve your strategy, you will only know once you’re presented with its results. This is why you must be meticulous when it comes to creating a financial statement.