Making sense of my financials
Getting your head around your business' financials can often seem daunting. However, financial statements are useful tools that clearly show the financial health of your business. Improving your understanding of them can offer valuable insights into how to better manage and grow your small business.
There are 2 main types of financial statements:
Balance sheet: A balance sheet is basically a statement of your financial position at a given time. It outlines your assets (stock, machinery, cash, money owed to you) and liabilities (loans, money you owe). It also captures your net assets or equity.
To get a snapshot of your financial position simply take the sum of all your assets and subtract the sum of your liabilities. This will show your net worth.
Your balance sheet can be prepared by your accountant when you complete your tax return.
Profit and loss: A profit and loss (P&L) tells you how much money your business made over a period of time. It lists your income and expenses. Subtracting your total income from total expenses allows you to calculate your profit.
Keep on top of your financials
While your 2 main financial statements can show an annual view, interim financial reporting is a good way to monitor how your business is performing monthly or quarterly.
There are many accounting software packages available that can assist you produce regular financial reports. These packages can provide you with an understanding of how your business is performing in real time, while affording you the opportunity to make necessary adjustments.
If you’d like to discuss your options with a business manager, complete our short enquiry form and we'll contact you or call us on 132 142 (8am-8pm, Mon - Fri).
Things you should know
The taxation position described is a general statement. You should obtain your own independent tax advice in relation to your individual circumstances.