Everything you need to know about financial statements as an entrepreneur
I’m sure you have heard the term ‘financial reports’ before, but as a new entrepreneur, you are probably wondering, “Why do I need them?”
So what exactly are financial reports?
Financial reports are really just a way of organizing all the transactions in your biz (in different ways – examples below!) to tell you different things about how your business is performing. As a business owner, it is incredibly important that you are tracking your numbers so that you can understand the financial health of your business, and use that information to grow as a company.
The most common financial reports are:
Balance Sheets
Balance sheets provide a snapshot of your business’s current financial health. For example, do you have enough cash to pay your credit card bill? Do you have enough in the bank to cover your loan payments that are coming up?
Profit and Loss Statements (aka Income Statements)
A Profit & Loss Statement displays your revenue (aka your income or sales), expenses, and net income (aka your profit). This report compares the revenue you brought in to your expenses, to outline your net profit for the year.
Why do you need them?
Financial statements are important for many reasons. They not only help you track your numbers, but they give you a well-rounded look at every aspect of your business so you can make informed financial decisions, project growth, and set goals to map out how you are going to achieve that growth!
For example:
By having accurate financial statements, you’re able to make informed decisions when it comes to hiring new team members, taking on more clients, expanding into new office space, and growing and scaling your business in a profitable way!
Projecting growth in your biz without having accurate historical numbers is like throwing spaghetti at a wall and hoping it sticks. To project accurate growth year over year, you need to understand what your business is capable of and make projections that are not only exciting but also realistic!
I recommend working with a CPA or Accountant to maintain your books and have accurate financial reports to grow and scale the business of your dreams!
Still have questions about Financial Reporting? Let’s connect! Schedule a 1:1 VIP call to gain some immediate clarity around your questions and leave with some actionable to-dos!
