Accurate financial records are key for day-to-day business operations and necessary if you seek funding for expanding your business. Maintaining a system for keeping your records will also help you correctly price your products or services, identify your margins and cash flow in addition to assist with filing taxes. The following are a few primary financial statements for your small business as recommended by the Small Business Administration.
- Balance Sheet: The basic equation for a balance sheet is liabilities + owner’s equity = assets. The two sides of the equation must be balanced out—hence the name. This is an overall snapshot of the financials for your small business. Liabilities are what the business owes including salaries, accounts payable, loans, mortgages, bonds, etc. The owner’s equity includes any money invested by the owner. A template is available for download through SCORE.
- Profit and Loss Statement: Also referred to as a P&L or income statement, it is a summary of the profit and losses over a specific time period. The basic equation is profit and loss = revenue in – expenses incurred. It should be reviewed at minimum on a monthly basis. Download SBA’s template for free.
- Cash Flow Statement: This statement measures that money coming in (cash inflow) and going out (cash outflow). Cash inflows are from sales, accounts receivable collections, loans and other investments. Whereas, cash outflows are equipment purchased, expenses paid, inventory and other payments. Calculating your ending cash balance can be done with this formula: Beginning cash balance + cash inflows – cash outflows = ending cash balance. Download SCORE’s template here.
Come to the Business Foundation Series on Legal and Financial Statements this Wednesday, Nov 29 at 6:00pm on the 5th floor of the J. Erik Jonsson Central Library! With all the regulations, it is easy to become overwhelmed and frustrated with these essential business concepts. This is a great opportunity to learn the basics and ask questions about how to navigate legal and financial statements. Furthermore, the library’s Small Business Center resource library on the 5th floor has legal and start up guides such as:
- Summary: Build a foundation for your business, online and off. Create and implement business and marketing plans. Comply with tax rules, including those affecting home businesses.
Deduct it!: Lower your small business taxes. (Publication 12/30/2017)
- Summary: Deduct It! shows you how to maximize your business deductions–quickly, easily and legally. Easy to read and full of real-world examples…Deduct It! Shows you how to avoid problems with the IRS, including having your business classified as a hobby. It also explains how to amend your tax return if necessary. Whether your enterprise is just starting or well established, this book is indispensable to your financial success.
- Summary: Women starting a business venture need the legal and practical start-up and management information you’ll find in The Women’s Small Business Start-Up Kit. Get the solid advice and business basics every woman entrepreneur needs.