Financials is the term used to refer to the Profit and Loss account and your Balance Sheet reports. These reports are generated at certain intervals e.g. monthly; quarterly or annually that tell you how your business is performing.
A lot of small business owners do not have financials. The focus of their bookkeeping is to be prepared for tax time. This is a shame as they are missing out on a lot of information that could help them be more successful owners.
Having financials prepared on a regular basis will provide information for the business owner that will help guide business decisions and alert the owner to issues or opportunities for their business. At tax time, all that will be required is to either share their files with their CPA or print out the reports, to file their taxes.
The two commonly used reports are the Profit and Loss statement and the Balance Sheet.
The Profit and Loss statement is a report generated for a period of time - a month, quarter, year etc. It records the income and expenses of the business and shows you the gross profit and net profit or loss of the business for the given period.
The Balance Sheet is a report generated at a specific point in time - last day of the month, last day of the quarter, last day of the year etc. It records the assets and liabilities of the business and shows you how liquid your business is and what working capital you have.
Stay tuned for our next post which will help you understand the information (terms) in these reports.
Please reach out to the Handle It team if you have any questions on these topics. 833-202-7676 or at firstname.lastname@example.org.