To keep track of the financial ups and downs of your small business, there are three important reports to reference: balance sheet, cash flow statement, and income statement. Although there are countless other reports, these three will give you the best idea of where your business stands and where it is headed. Each report provides its own window to further understanding the financials of your business. We challenge you to run these reports once a month to maintain a firm understanding of where your small business stands!
If you’re just starting to navigate your books, you may be unsure of some of the lingo. It’s like a different language for those outside of the accounting world, but the more you work with your books, the quicker you’ll catch on. What’s important is to think of everything in terms of your business; these terms provide you with vital information about your company’s standing. Let’s go over some common terms you’ll frequently hear and need to use in order to discuss and understand your books.
Your financial reports tell you everything you need to know about your business - but do you know what they’re saying? Or what all the little pieces mean?
Financial reports are a compilation of all the numbers floating around your company. There’s your Balance Sheet, which supplies you with a detailed look at your company’s financial health at any particular moment in time. It gives you the dollar amount of assets and liabilities in your company’s net worth. This includes fixed assets, inventory, cash, accounts payable and receivable, payroll liabilities, line of credit, and more. The Balance Sheet also tells you the equity in the business.
Running a business is a challenge. Keeping up with your books is one moving part of running a business. This can either go incredibly smoothly or be a complete disaster. If you’d prefer the former, we strongly recommend you check out QuickBooks. Not only will QB make your bookkeeping easier, it’s also a great tool for helping you run your business. Here are several reasons why QB should be your bookkeeping software:
Many people believe that having everything right at our fingertips at a moment’s notice is a bad thing. However, when it comes to your accounting records, it is the best thing. Real-time accounting allows you to access and check your records at any time from any device, 24 hours a day, day or night.
Have you ever left a conversation with your accountant with nothing but confusion, asking yourself “What did they just say?” You’re not alone. We’re here to bridge the gap between accountant and client. Here is a list of common terms you will likely here from your accountant, if you haven’t already, and what they actually mean:
Accounts Payable (A/P): Money you owe to others.
Accounts Receivable (A/R): Money others owe to you.
Asset: Items of value owned by a business. This includes money in your bank, A/R, equipment, vehicles, buildings, and so on.
Bad Debt: Uncollectible A/R.
Balance Sheet: A list of company assets, liabilities and equities for the company.
Cost of Goods Sold (COGS) (a.k.a. Cost of Sales—COS): What it directly costs to produce your product or service. For manufacturing companies, this includes raw materials and the direct labor to make your product. For service companies, this includes the cost of labor to directly service your customer.
Equity: How much you have invested into your business or taken out of your busin