Skip to 0 minutes and 8 seconds Small business owners need to understand how to read their statements. It is critical that they understand. It shows them how their business is performing. Where you should really be concentrating on, the income statement, showing your profitability, and the cash flow statement. The income statement is reflecting the profitability of the business. Your statement of financial position is determining the health of your business and the cash flow statements are alerting you of when cash is coming in and cash is going out. Most small businesses file because of lack of cash. The reading of the financial statements is absolutely critical.
Skip to 0 minutes and 56 seconds Well, you could learn to read financial statements by going and seeing your accountant or bookkeeper. And they could help identify and explain to you how to interpret the financial statements. You could look at doing a small course yourself. Some industry associations may also offer short courses in regards to interpreting financial information.
Skip to 1 minute and 25 seconds It is important to understand your financial statements, because it will provide a path way for you to be able to further grow your business, provide further opportunities for your business, and for you to have a better understanding of how your business.
Which statements are most important?
Financial statements are reports that help guide the owner to identify their financial position.
The most common statements that help business owners to understand their financial performance are the statement of financial position, the income statement and the cashflow statement.
- Statement of financial position, also known as a Balance Sheet
The Balance sheet is a snapshot of what the business owns/and or controls, what it owes and the amount invested in the business as equity at a given point in time. It is usually produced on a monthly and annual basis.
- Income statement, also known as a Profit & Loss Report
The income statement summarises the income and expenses of the business for a period of time. It is usually produced monthly and annually. The difference between the income and the expenses results in either a profit or loss for the business. Businesses may also produce this report with a comparison against a budget.
- Cashflow statement
A cashflow statement records the money coming in and out of your business for a set period of time. Cashflow statements can be produced daily, weekly, monthly, quarterly or annually.
The use of accounting software will help you keep your financial records up-to-date. A bookkeeper can help choose appropriate accounting software for your business. Accounting software can be a simple solution to provide you with management reporting and assessment of your business performance.
Search the internet to investigate the types of accounting software that are available and choose one statement or report that can be produced from the software.
Use #RMITPricing to search for tweets posted from other learners to explore the different accounting software others have found.
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