Financial statement preparation is the heart of accounting. It is the process of taking all sources of your cash flow and organizing them in a way that makes sense. A clear and precise statement will make it easier to do the following:
Identify areas of overspending
Identify areas of underspending
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Prove financial responsibility
Your statements provide a comprehensive collection of your current financial performance.
Sota Bookkeeping will put all your necessary statements together, and you will experience peace of mind knowing that your statements are done right.
Also known as a profit and loss statement, the income statement provides a list
of all your revenues and subtracts an itemized lists of all your expenses, resulting
in your net profit (or loss).
With an income statement, you can:
Track revenues and expenses so that you can determine the operating performance of your business
Determine what areas of your business are over/under budget
Identify specific items that are causing unexpected expenditures (phone, bank charges, monthly subscriptions, office supplies, etc.)
Track dramatic changes in your expenses as a percentage of sales
Determine your income tax liability
A balance sheet gives you a snapshot of your business'
financial condition at a specific moment in time.
With a balance sheet, you can:
Quickly get a handle on the financial strength and capabilities of your business
Identify and analyze trends, particularly in the area of receivables and payables. For example, you may be collecting payments from customers more slowly than you were previously
Determine if your business is in a position to expand
Determine if your business can easily handle the normal financial ebbs and flows of revenues and expenses
The balance sheet, along with the income statement, is essential when providing financials to potential lenders such as banks, investors, and vendors who are considering how much credit to grant you.
Cash Flow Statement
Arguably the most important financial statement, the cash flow statement describes
your sources of cash and how that cash was spent. This makes it useful for determining
the short-term viability of a company, particularly its ability to pay bills.
It is perfectly possible for a company that is shown to be profitable according to
accounting standards to go under if there isn't enough cash on hand to pay bills.
Unlike the many ways in which reported earnings can be presented, there is little that can be done to manipulate your cash situation. Barring any outright fraud, the cash flow statement tells the whole story. The company either has cash or it does not. Analysts will look closely at the cash flow statement of any company in order to understand its overall health.
Are there other reports you'd like to see on a monthly basis? Let me know and we'll come up with something!