Financial statements are essential for every business because of various reasons. As a business owner, if you want to make the right financial decisions, then you must have accurate financial statements. If you don’t have enough time to prepare these statements, then it would be better to hire small business bookkeeping services. Bookkeepers are experts in managing these statements for your business because these statements have essential information about your business’s financial status and business activities. To know more about financial statements and their importance for your business, keep reading this blog:
What are Financial Statements?
Financial statements are a summary of the business’s financial performance over a specific period of time. Apart from this, these statements are helpful for all stakeholders, including investors, management, financial analysts, etc. to assess and make appropriate economic decisions by making a comparison of the past and current financial performance of your business and therefore, forecast future performance and the company’s growth. If you can’t prepare financial statements on your own, then you can seek help from a bookkeeper for small businesses as bookkeepers are experts in preparing and handling financial statements.
Types of Financial Statements
The following are some common types of financial statements:
- Balance Sheet
A balance sheet shows a picture of the company’s financial situation. It gives information about what the company owes and what it owns. Basically, a balance sheet is categorised into three sections, such as assets, liabilities, and equity. This is a good indication of a business’s financial health.
- Cash Flow Statements
With the help of cash flow statements, you will be able to see how your business has produced and used cash over a specific time period. In addition to this, it also gives information about the plan of a company to spend money. You can also make a comparison with how much cash you actually spent.
- Income Statements
An income statement offers information about what your business has earned. Usually, it is broken down into quarters or years. Basically, through income statements, you will be able to know how much revenue came in. In addition to this, it will also give detailed information regarding what your business has spent to earn that money.
Thus, you can opt for small business bookkeeping in Melbourne, if you want someone to prepare and handle these financial statements.
Why are Financial Statements Important?
The following are some reasons why your business needs to have financial statements:
- Knowing Business Profitability
The profit and loss statement helps to identify whether your business is making a profit or not. With the help of income statements, you can easily determine the net income of your business.
- Spot and Mitigate Errors
It is important to have accurate financial statements in hand so your bookkeeper can spot and mitigate costly errors. Identifying errors when performing the bank reconciliation process will help the bookkeeper to resolve those issues.
- Improved Decision Making
If you are about to grow your business, then you need financial statements that can help you know the financial condition of your business, such as a balance sheet, which can give a clear picture to identify what and where opportunities are that you can grab. Through financial statements, your bookkeeper can easily identify aspects such as the assets the business has and whether it can afford to buy more or not. In addition to this, with these financial statements, you can predict and plan for the future to ensure that your business is ready for new changes within the business environment.
- Business Success Proof
Financial statements contain information regarding your past finances for the overall success of a business. In case, you want to sell your business, then financial statements will help new stakeholders decide whether they want that business or not. Having a professional accountant is important in such cases to ensure records are correct. So, if you are looking for accounting in Melbourne, then make sure to hire the best providers.
- Evaluate Tax Liabilities
When your business is growing, then your business taxes are also increasing. Many times, business owners get shocked when they see the tax amount they have to pay to the ATO. It is obvious that every business owner will be looking to reduce their tax burden, however, how can you do this without having accurate financial statements? Once you know about tax liability, then you will start looking for different methods to minimise the amount of tax that you need to pay.
The blog shares information on financial statements, their types and their importance for every business. If you want someone to handle your financial statements, then you can take help from a bookkeeper. If you are looking for the best bookkeeping services, then you can contact Reliable Bookkeeping Services.