Business owners have to make deicisons on a daily basis that will impact their business positively or negatively. The most critical pieces of information they have to guide those decisions are their company balance sheet and profit and loss statement.
In order for financial statements to be effective, they must be:
- Timely - received by the 10th of the month for the previous month
- Accurate - all bank and credit card accounts reconciled
- Comparative - show current month, year to date, and budget comparisons as well as a rolling 12 months for trend analysis
- Segmented - to show profitability by division or line of business as well as a consolidated total
Your profit and loss or income statement shows you what happened and how much money you made in a certain period of time. Questions you should ask when reviewing your profit and loss statement:
- Is your profit margin as expected and is it consistent with previous months?
- Is your overhead holding steady or is it creeping up?
- Are your net income and profit margin in line with industry standards?
- Are you on target with your forecast or projections for the year?
Your balance sheet shows what you own and wht you owe. Questions you should ask when reviewing your balance sheet:
- How has it changed from the previous period?
- Are things classified correctly?
You should review your financial statements each month to se if your business is performing as expected and make changes as necessary. Accurate financial statements are the key to creating budgets, obtaining loans and financing, and directing your business to a profitable course.
If time and resources are an issue, our qualified staff can help!
Call today for a complimentary consultation!
Carolyn Murray
972-378-7787
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