An integral part of running a small business is analyzing your finances on a regular basis. You need to stay up to date on important financial aspects of your business such as your revenue, expenses, and cash flow. At PL Consulting, we specialize in putting together your financial statements and analyzing your financial position at the end of each cycle. However, you still need to understand the basics of accounting when it comes to your small business. Luckily, we have put together an overview of the financial statements you need to prepare.
Income Statement (AKA a P&L statement)
An income statement for your small business is a breakdown of the profits and losses over a specific period of time. You will need your need your sales revenue and a list of your expenses during the time period to prepare an income statement. Your statement will show the revenue from the sales of your products, as well as, the income you receive if you sublet a portion of your business. An income statement will also show all of your business expenses and any depreciation over the specific time period, nowadays, most accounting softwares will automatically generate this for you.
When it comes to running a business, you need to know your position regarding your assets and equity for a specific point in time. A balance sheet breaks down what you own, known as your assets, as well as, your what you owe, which is your liabilities and equity. You will see your assets, liabilities, and equity calculated for the last day of the accounting cycle. The balance sheet will also state the depreciation for a specific item from the date the item was acquired to present day. The Balance sheet is important because Profit or lack thereof are not the only indicators of success. One example is Uber which is valued at ~ $70 billion dollars despite not being profitable.
Cash Flow statement
An important financial statement you need to produce at the end of an accounting cycle is the statement of cash flow. The statement compares two time periods of financial data’s and shows how cash flow has changed over all of your accounts. So, it is important that you prepare your cash flow statement last because you will be taking information from your income and balance statements. The statement will divide cash flow into operating, investment, and financing cash flows. You will then see how your cash flow has changed over the two time periods. This statement can be hard to read with someone without prior knowledge and its best to go over it with a professional.
PL Consulting Can Help You Plan Your Budget!
PL Consulting offers a diverse range of bookkeeping and other financial services. Each of our services is customized to fit the needs of our client and his or her business plan. Our team can help you with each step of your business from organization, to budget, to financial maintenance. We are located in Pikesville at 119 Old Court Rd Baltimore, MD 21208. Contact us at 410.764.3731 or firstname.lastname@example.org so that we can assist you with your bookkeeping needs. Remember to stay up to date with everything PL Consulting by following us on our social media platforms via Facebook, Twitter, and Google+.