Profit, loss, cash flow… we’re all familiar with these terms. But the balance sheet is the ugly thing nobody wants to talk about.
But guess what? That’s exactly what we’re going to talk about today.
Let’s rip off the band-aid and get right into it.
What is a balance sheet?
Your balance sheet is a record that contains information about:
- Who owes you money
- Who you owe money to
- What’s left after you paid the owed money
If it’s up to date, it can give you an accurate snapshot of your financial situation.
You can access it at any time but in order to understand your business’ financial position, you need to know how to decipher it.
How to look at your balance sheet
- Examine your assets including money people might owe you. The key asset for your business is: How much money is coming in?
- Identify your liabilities: Who do you owe money to? It could be the ATO or the bank.
- Analyse your equity or shared capital: What‘s your leftover? How much profit did you make?
All these elements will indicate your financial stability.
You might also be interested in: What Is A Shareholders’ Agreement And Why Do You Need It?
Balance sheet reconciliation is a must
When I see a new client, 9 times out of 10, their balance sheet items haven’t been reconciled.
What does it mean?
It means I’ve got third-party pieces of information.
For example, if I take a look at my client’s bank statements and compare those numbers with my accounts, they should match. Otherwise, I have unreliable information to work with.
How can you do a financial evaluation of a business if the information you have is inaccurate?
Tip: Make sure your balance sheet items are reconciled every month. Good financial reporting should be done monthly.
[ctt template=”7″ link=”Od04f” via=”no” ]Tip: Make sure your balance sheet items are reconciled every month. Good financial reporting should be done monthly.[/ctt]
Don’t do it alone, this isn’t a one-man job. Work with your accountant on this. They are the number crunching expert. If you’re not getting accurate information from your accountant, consider looking for someone else.
At the end of the day, the financial viability of your business is your responsibility. You’re the driver!
Let’s reconcile your balance sheet!
Whether you need someone who can do the number crunching for you, or you need business advice from an expert, the amazing team at Shuriken Consulting and I are here to give you a helping hand. We’d love to hear from you! Let’s get in touch: