One of the most important items on the list of a small business owner is to keep track of their finances. Financial Statements are written records that do just that by conveying the company’s activities and financial performance.
After guiding many small business owners through the weeds of compiling financial statements, NEWITY has come up with the top three financial template walkthroughs to make your bookkeeping easy and accurate.
A Balance Sheet is a quick snapshot of a company’s finances. This statement outlines the assets, liabilities, and net worth of your company. As a small business owner, it is important to keep updated Balance Sheet statements whether it is on a quarterly or year-end basis for many purposes including taxes, legal, regulatory, or/and loan applications.
The Profit and Loss Statement (P&L) shows how well your company is generating profit. The statement summarizes the expenses, loss and revenue of the company. Since the accounting concept for this statement shows the business income over a period of time, it is a key indicator in many areas including making good business decisions, attracting investors, forecasting expenses and revenues, and getting taxes ready.
The Personal Financial Statement (PFS) outlines a person’s net worth by subtracting the liabilities from the assets. There are many situations that require a business owner to present an updated PFS including planning to lease a commercial office, buying another business, or even seeking financing. This statement is key when applying for a loan because it allows the lender to view a snapshot of the business owner’s management of personal finances.