Columbia, S.C. (WLTX) - Happy Money Monday to our entrepreneur viewers. Today we're covering the basics to help you understand the financial health of your business.
Here are 3 financial documents every small business needs:
1. Balance Sheet - This is a great way to provide a financial overview of your business. If you're a visual person, this financial report will be easier for you to understand as it's displayed as a chart. The left side shows what your company owns (aka your assets), while the right side will show you your expenses and equity.
2. Cash flow Statement - Similar to your budget for your personal finances, the cash flow statement shows how money comes and goes for your business. This helps you understand how your business is operating on a day-to-day basis and will help you answer the question, "How much is my business truly making?"
3. Profit-and-loss statement - The P&L is commonly used when a business owner wants to make a purchase like a car or house. We've talked about taxes a few times this year and the profit-and-loss statement will show you your business's taxable income. P&L statements, or income statements, are especially important for business owners looking to scale their business with the help of investors because it tells if you are making money or losing money.
As you understand the financials of your business, you'll be able to make sound decisions on growing and improving your company and your personal financial outlook.