Business & Marketing

Help corporate owners understand their financial statements

There is no doubt that the current recession is as long and difficult as we have seen for many years. And I hope we will not be able to see again for a while. If you are business owner whose businesses do not make a profit and you do not have the capital to invest and keep the business in progress, you may be wondering about your options.

The first option is to adopt a real evaluation of where you are. One of the best ways to do is talk with your accountant. Make sure your accountant does not simply help your tax return to meet compliance, but helps you look at the numbers and understand how your business happens.

What do you want to know?

Most corporate owners understand their gross sales. Some are helped to use this number to explain the success of their business. For example, have you spoken to a business owner who said “sales are up 20% of that time last year”. They say that with great pride but it does not tell the complete story.

Some business owners can tell you the net profit of the company. Net profit is simply what they pay taxes on or lower cost of goods less expenses. Some corporate owners like to say “our final result was up 10% compared to last year.” It’s good news but it does not tell the complete story.

Some business owners can enter their financial statements and understand what is happening in their business. For this business owner, it is the statement of result. If they prepare this document themselves, they know what’s going on, but most corporate owners have a resource such as a family member or at least one bookkeeper to deal with these details for them. However, it leads to a few points. The first point is that theft in small businesses, because of the recession, is at the highest for many years that the person who manages the books is able to cook the books while flying funds that the owner does not know. They can fly funds through a false invoice or buy certain goods, the compensation of companies for them, then take the goods and get a refund and keep the money. There are many creative means for someone to find money if they wish. So, how does a business owner protect himself? One of the means is that the owner of the company has a line by line of line of the result of income at least on a monthly basis. Any article that appears and the owner can not remember what the expense was for can be challenged to find an acceptable answer. It can then be wise to do random tests to ensure that all expenses can be verified, such as verification to ensure that the new computer that the revenue required is always around or that the particular order inventory was necessary and arrived, etc. Monthly profit test. And the loss followed by random checks creates good discipline and helps the owner stay at the top of the company’s critical aspect, but that does not tell the full history of financial health of the company.

The health of the company is really revealed by working with the declaration of result and the owner who can read and understand the balance sheet. The balance sheet is the place that explains how the entering and out of the company has been used. This shows what is due and it shows what the company has (or the assets of the company). It reveals the owner owner and investments and basic account information and accounts provided and how they follow. If the accounts receivable increases, the payable accounts can also increase, but they must keep their report coherent.

If a business owner can include a healthy balance sheet, they are well on the verge of maintaining and developing a prosperous business. Understanding a balance sheet does not mean that you have to become a CPA. This means that you have to ask questions until you “get it”. Most corporate owners are afraid to understand the balance sheet because it is too confusing. However, if you ask the same question Mo

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