Caines Hodges
Monthly Blanace Sheet
A balance sheet gives you a snapshot of your business’ financial condition at a specific moment in time.
A balance sheet helps you:
- ZQuickly get a handle on the financial strength and capabilities of your business.
- ZIdentify and analyze receivables and payables trends.
- ZDetermine if your business is in a position to expand.
- ZDetermine if your business can handle day-to-day financial ebbs and flows of revenues and expenses
- ZDetermine if you need to take immediate steps to bolster cash reserves.
- ZDetermine if your business has been slowing down payables to forestall an inevitable cash shortage.
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A monthly balance statement offers a way to look inside your business and outline what it is really worth. A balance sheet is different from a measure of profit and loss. It’s a list of assets and liabilities. Any good balance sheet includes some basics:
- What the business owns (real estate, vehicles, office equipment, etc.)
- The revenue you expect to take in (accounts receivable)
- Expenses you expect to pay out (accounts payable)
It’s clear that balance sheets are critical documents because they keep business owners like you informed about your company’s financial standing. As Inc. magazine pointed out, many business owners fail to recognize their companies are in trouble until it’s too late. This is because some business owners aren’t examining their balance sheets. Typically, if the ratio of your business’s assets to liabilities is less than 1 to 1, your company is in danger of going bankrupt, and you’ll have to make some strategic moves to improve its financial health.
Balance sheets are also important because these documents let banks know if your business qualifies for additional loans or credit. Balance sheets help current and potential investors better understand where their funding will go and what they can expect to receive in the future. Investors appreciate businesses with high cash assets, as this insinuates a company will grow and prosper.
The balance sheet is a snapshot of a business’s financial records at a given date. The total of the owner’s equity is the book value of your business as at that date.
This report helps a small business owner quickly understand what their business is worth.
A balance sheet can help you identify trends in your business’s finances, particularly when it comes to relationships with customers and suppliers.
Are your customers taking longer to pay you? Is your debt collection out of control? Are you taking longer to pay your suppliers due to cash shortages? Are you over/understocked?