Many things will worry you when you become a business owner. You’ll need to think of the quality of the products you sell, your marketing strategies, your inventory, customer feedback, and more! While some of the tasks are manageable, there are also areas you’ll probably need help with, like bookkeeping and accounting.
Getting professional help allows you to focus on the responsibilities you can handle while ensuring you stay on top of your business’s finances. Besides, managing the money coming in and out of your business is a severe obligation, as this affects the success or failure of your business.
In this blog post, we’ll answer the question, “What are financial statements?” and share how partnering with a bookkeeping firm can help you ease your worries about financial statements. If you’re still thinking twice about it, keep reading, as we’ll list eight ways to convince you that connecting with professionals is the way to go!
1. Updated Books
Before you prepare financial statements, a bookkeeping firm will help you with the basic task of keeping your books in order. All the details in the financial statement will rely on how complete and organized your books are.
Professionals will utilize bookkeeping and accounting software to ensure all your financial transactions will be recorded. Income from various payment gateways and your bank will be in the books. The expenses your business incurs will all be there too. So, when you need any financial statement you can quickly generate one.
The software these firms use generates statements in just a few clicks. Because books will be up-to-date and are constantly checked, you can be sure that the details in the statements are updated and accurate.
2. Know Your Assets and Liabilities
Financial statements are so detailed that you can see all specifics about your assets and liabilities. Some assets you’ll view are the following:
- The sales you make from your products and services
- Accounts receivable or the payments you have yet to receive from clients or customers
- Prepaid expenses
- All company equipment, property, and machinery
- Company investments
- Product and company patents and trademarks
Meanwhile, you’ll also know the costs and expenses of running your business. Some details are as follows:
- Accounts payable or the money you have yet to pay suppliers or manufacturers
- Debts and loans
- Salaries for your team
- Dividends payable or the share of income you need to give to shareholders
By seeing where your money is coming from and being spent, you can create game plans with specific targets to minimize your costs and increase your income.
3. Understand the Reports You’re Getting
With the help of a bookkeeping firm, all your financial data will be consolidated in one place. They’ll be the ones to generate the financial statements you need. After that, they will also help you learn how to read financial statements. Bookkeeping firms have Certified Public Accountants (CPAs) who will be there to analyze and make sense of the following reports.
The balance sheet is also called a financial position or net worth statement. Details like assets, liabilities, and equity can be found here. Through this report, you’ll know the value of your business and whether you can meet your financial obligations.
Cash Flow Statements
This statement is also known as a financial position statement. The report allows viewers to see whether your business is getting enough income to cover operating expenses and loan and debt payments. The report reflects how fast money can come into your business and how it is being spent.
When you see a report labelled as a statement of revenue and expense or a profit and loss statement, you are also looking at a company’s income statement. The income statement reflects your business’s financial performance at a given period. In this report, you’ll see details like net income, expenses, revenue, and earnings per share.
With the help of qualified professionals, the statements will be categorized as numbers in a file. Still, with a financial firm’s help, you can make sense of these financial statements to guide your decision-making.
4. Get You Ready for an Investor Presentation
Investors are essential for every business as they can provide additional funding for your venture to grow. A bookkeeping firm can get your finances in order and ready for a presentation for investors.
Investors will want to see your business’s cash flow statement to see how you generate cash, how fast you accumulate it, and the different expenses you have. They’ll want to know whether your finances are stable and well-managed because investors want to invest money in a company where they’ll have higher chances of getting returns.
On top of the monetary help investors can give, these individuals can also give you valuable insights about your business. More often than not, individuals who want to invest in your business are the ones who are well-versed in your trade. But of course, aside from their experience and knowledge, numbers talk louder, so they’ll still need to base their decision on the financial reports you and your partner firm generate.
5. Complete the Data for a Financial Analyst
It is a financial analyst’s job to make business models that fit your business, but they can only do that when they have the complete details about your finances. When you have your bookkeeping in place, a financial analyst has a sea of data to use to make accurate models for your business. They can also use collected financial statements for their analysis.
You won’t need to worry about incomplete annual data with a bookkeeping firm. Many firms backtrack your finances from the beginning of the year, even if you partner with them midyear. In the long run, you can accumulate historical financial data, which the financial analyst can use to analyze your business finances further.
6. Stay Confident in Business and Financial Planning
Together with financial analysis are business forecasting and planning. Forecasting isn’t 100% accurate because many factors can change the forecast. The best thing you can do to get the most accurate report is to get as much detailed and accurate historical data as possible.
The historical data will become the basis of whether there are trends occurring in your business that can still happen in the present and future. You can generate how your future financial statements will look, too. And as a result, you can set a date on when you can begin talking to investors or taking the risk of getting loans.
7. Worry Less About Creditor Evaluation
Your business financial statements, forecasts, and plans are not only helpful when getting investors but also when applying for loans. If creditors see good trends in your forecasted financial statements and your plans to achieve more success, they’ll be confident you’ll have the capacity to pay them back. Your past, present, and future statements can also be the basis for how much they can lend you.
8. Be Aware of Your Net Income/Profit
You’ll also be aware of your net income through business financial statements. Net income, also known as profit, is your income after deducting all company expenses. When you know your business income, you can plan what to do with your profit.
Some of the things business owners do with their profit are the following:
- Save the money in the bank for emergencies
- Improve business operations by investing in new software and equipment
- Make over your office
- Invest more money in marketing to reach a wider audience
- Train and educate employees
- Pay yourself
- Hire new team members or outsource to help business operations
Various financial reports, from the balance sheets, cash flow, and income statements to your forecasts, can help you see the profits you can earn. And with that, you can see where you can spend your profits best.
Beyond Financial Statement Assistance From Unloop
By now, you should already know the importance of financial statements in your business. Financial statements can give you a view of your assets, liabilities, and equity. They will also give you an overview of your business’s profits, losses, and cash flow. However, to get all of these, you’ll first need accurate data, which you can get through the help of professional bookkeeping services.For any financial services, contact Unloop. We offer services beyond bookkeeping, too. Here, we offer accounts payable services, forecasting, payroll, and tax management. We have solutions whether you sell on Amazon, Shopify, direct-to-consumer, or multichannel. Through the help of our team of trained experts and the utilization of the latest software, we can manage your business finances smoothly. Give us a call now so that we can begin the work!