Financial Statements

Balance Sheet

Balance sheets, along with income statements, are the most basic elements in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant you.

The balance sheet is a snapshot of your business financials. It includes assets, and liabilities and net worth. The “bottom line” of a balance sheet must always include (assets = liabilities + net worth). The individual elements of a balance sheet change from day to day and reflect the activities of a business. Analyzing how the balance sheet changes over time will reveal important financial information about a business. It can help you can monitor your ability to collect revenues, manage your inventory, and assess your ability to satisfy creditors and stockholders.

A balance sheet can help you to monitor your ability to:

• Quickly get a handle on the financial strength and capabilities of your business
• Identify and analyze trends, particularly in the area of receivables and payables. For example, if your receivables cycle is lengthening, maybe you can collect your receivables more aggressively
• Determine if your business is in a position to expand
• Determine if your business can easily handle the normal financial ebbs and flows of revenues and expenses
• Determine if you need to take immediate steps to bolster cash reserves
• Determine if your business has been slowing down payables to forestall an inevitable cash shortage

Income Statement

An income statement, otherwise known as a profit and loss statement, basically adds an itemized list of all your revenues and subtracts an itemized list of all your expenses to come up with a profit or loss for the period. The income statement is a simple and straightforward report on a business’ cash-generating ability. It’s a scorecard on the financial performance of your business that reflects when sales are made and expenses are incurred. It draws information from the various financial models such as revenue, expenses, capital (in the form of depreciation) and cost of goods.

An income statement allows you to:

• Track revenues and expenses so that you can determine the operating performance of your business.
• Determine what areas of your business are over-budget or under-budget.
• Identify specific items that are causing unexpected expenditures. Like phone, fax, mail, or supply expenses.
• Track dramatic increases in product returns or cost of goods sold as a percentage of sales.
• Determine your income tax liability.

General Ledger Maintenance

I cannot stress it enough how important it is to maintaining a clean General Ledger The general ledger reflects a permanent summary of all your supporting journals, such as the sales and cash receipts journal and the cash disbursements journal. Closing your books and maintaining your general ledger should be one of your top priorities.

The general ledger is the core of your company’s financial records. These records constitute the central “books” of your system. Since every transaction flows through the general ledger, a problem with your general ledger throws off all your books.

Having us review your general ledger system each month allows us to hunt down any discrepancies such as double billings or any unrecorded payments. Then we’ll fix the discrepancies so your books are always accurate and kept in tip top shape.