Okay, we get it – reviewing your business’s financial documents probably isn’t the most thrilling activity for you (or for most people, for that matter). In fact, you may even find it to be the perfect cure for your persistent insomnia.
But here’s the rub: In order to have a successful business, you must have clear, accurate financial documents and you must also review them regularly. Otherwise, how can you know how well your business is actually performing and what improvements need to be made?
Let’s get down to basics and take a look at three of the essential financial documents every business needs, and what each of them means when it comes to understanding the true financial health of your business.
3 financial documents every business needs:
What it is: A balance sheet gives you a quick, at-a-glance overview of your business finances, including your total assets and expenses.
Cash Flow Statement
What it is: This shows you what money is coming in and going out of your business each month to help you track your cash flow, which is critical to the long-term success of your business.
Profit & Loss Statement
What it is: Your Profit & Loss Statement (aka ‘P & L’) is the most important financial document because it reflects the overall health of your business. Your P & L is what potential investors or business lenders are going to be most interested in because it shows whether or not your business is actually profitable.
Here’s some great news: We happen to love this stuff. Feel free to fire away with any questions in the comments or reach out to us directly if you need any help with navigating choppy financial waters. You really don’t have to manage this stuff all on your own.