When it comes to business financials, there are three main financial statements you should be aware of:
These three financial statements give you a good overview of how your business is running. If your business is looking at securing capital or at financing from an accounts receivable factoring company, these statements may be needed to show the financial position of your company.
This is one of the most important financial statements for a business. Your cash-flow statement provides an overview of your net increase or decrease each month. It’s essential to have positive cash flow to maintain operations and fund potential growth.
Keeping a positive cash flow is one of the biggest challenges businesses face. This is the main cause of business failures according to a study by U.S. Bank. As much as 82 percent of businesses fail due to poor cash management.
A cash-flow statement includes three sections outlining your operating activities, investing activities and financing activities.
There are also five numbers you should be aware of in your cash-flow statement. These numbers are: beginning cash balance, cash in, cash out, net change and ending balance.
If you haven’t created a cash-flow statement for your business, visit our “How to Create a Cash-Flow Statement” post here.
Simply put, the profit and loss statement, also known as an income statement, gives you a summary of the earned revenue and incurred expenses over a certain period of time. Typically profit and loss statements are done both quarterly and annually.
Profit and loss statements contain two main sections: operating items and non-operating items.
Operating items include the revenue and expenses that are associated with normal business operations. Non-operating items are just the opposite. If the expense or revenue is not directly correlated with the product or service you sell, it would be categorized under non-operating items on your profit and loss statement.
A balance sheet gives businesses a quick glance of their resources at a certain date. It shows a company’s assets, liabilities, and equities.
Your balance sheet should always equal this formula.
Liabilities + Equity = Assets
Liabilities for business include items such as your accounts payable, employee salaries, interest payments, and income tax.
The equity should be both the owner’s equity as well as any equity by shareholders.
Assets are things owned by a company such as land, equipment, supplies, and cash. This can also be any prepaid items such as insurance or rent.
It’s important to keep track of your finances and be aware of every expense and revenue source that comes in and out of your business.
Being aware of your business financial statements can help you recognize cash-flow issues, overspending habits, and business growth opportunities.
Keeping a positive cash flow is crucial to the success and growth of your business. For many businesses, this can be a challenge when customers take 30 days or more to make payments.
TCI Business Capital is a leading invoice financing company. Since 1994, TCI Business Capital has provided cash to 1000’s of companies involved in trucking, oilfield services, staffing, and other industries. For a free, no-obligation invoice financing consultation and quote, call (800) 707-4845.