As a Business Advisor, I ask almost every start-up entrepreneur I work with if they have any bookkeeping experience. The reply I get is often accompanied by a look of panic. New entrepreneurs excited about realizing their dream of starting a business often gloss over some of the details that relate to actually running that business. Bookkeeping is one of those details. Even if your knowledge of accounting is questionable and you plan to hire a CPA or bookkeeper to manage your books, every business owner needs to understand what money is coming in and what money is going out on a constant basis in order to manage his/her business.
There are three financial statements that are important for any business owner to understand. A balance sheet communicates exactly how much a company is worth—its so-called “book value” at a specific point in time. The balance sheet is divided into two sections, assets and liabilities. These numbers are further divided into current and long-term. Basically, the balance sheet indicates the company’s ability to pay bills and how much is owned vs. financed.
The profit and loss statement or income statement compares current revenues to expenses. These figures do not include any loan payments or deposits, just the active funds coming in and out of your business from buying and selling goods and services. This will give you a rough estimate of your average profit or loss for a given time period.
Last, but not least, the cash flow statement summarizes the movement of cash and cash equivalents in and out of a company over a period of time. The cash flow statement measures how well the company generates cash to pay debt obligations and fund operating expenses.
As you are already thinking your company needs a method to generate these statements. Join us on August 11 at 2:00 pm to learn about your alternatives. Kaili Holloway, CPA at CPA Consulting Group, LLP in Casper will present “Small Business Accounting Basics.” She will explain the various alternatives you have to maintain your financial records, how to choose the software that best meets your needs, provide a basic introduction to reading a balance sheet and income statement, discuss commonly misclassified accounts, and more. Bring your questions! Registration is free of charge, visit www.WyomingSBDC.org to sign-up.
More Training Opportunities
Watch these free webinars and boost your financial literacy on your own schedule:
- Things Your Accountant Hasn’t Told You About Your Business – https://register.gotowebinar.com/register/8724972627762783756
- If Your Business Is Not Making Money, Here’s What You’re Missing – https://register.gotowebinar.com/register/686605844083990285
- Stop Giving Away Your Profit – https://register.gotowebinar.com/recording/2973332750485533191
About the author: Cindy has been helping Wyoming entrepreneurs start or improve their businesses for the past 17 years. An entrepreneur herself, she thrives on the challenge of understanding each new business and business owner and helping them to succeed. Currently the owner of several rental properties, she has owned a number of other small businesses, including a want ad newspaper, a secretarial service, and a stained glass studio.