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Financial Reports All Owners Should Know

The Importance of Financial Reports
A lot of the restoration business owners I talk to will ask me how to improve their bottom-line. I usually like to start by asking them questions about their financial reports, and I find that most owners don’t know much about their financials. They usually leave that task in the hands of a bookkeeper or their accountant. This usually means that the business owner has little to no interaction with the day-to-day recordkeeping and financial standing of his or her business.

Not knowing your company’s financials can be dangerous, as it removes accountability and financial direction of your business, e.g., budgets can be allocated incorrectly, distributions can be taken out when there’s a lack of cash to do so, and some employees might not get paid on time (or not at all). That’s not what you want for your business, and that’s not what we want for it either, which is why we’ll be teaching you about three financial reports that every restoration business owner should know.

The Three Basic Financial Reports

Financial reports provide you with specific financial records and the specific financial position of your business. The three most important financial reports a business owner needs to be tracking are the Profit and Loss Report, the Balance Sheet, and the Statement of Cash Flows.

  • Profit and Loss Report (P&L): Tracks your revenue, expenses, and net profit. You want your revenue to exceed your expenses to have a net profit. The P&L can be used by both internal and external stakeholders to determine your profitability and to assess the risk factor for potential investors. This report is also good for determining performance and incentives.
  • Balance Sheet (B/S): Tells you the financial position of your business in a specified timeframe. This report is a “snapshot” of your business- it records the transactions in a period and tells you what your business looks like for that period. This is the report lenders will use to determine your business’s creditworthiness. Your Balance Sheet consists of Assets, Liabilities, and Equity. Assets are what your business owns, Liabilities are what your business owes, and Equity is capital you’ve invested in the business.
  • Statement of Cash Flows: Your “Where did the money go?” report. It tells you where the money is coming in and out of your business and helps you to make sense of how your P&L and Balance Sheet work together. This report is good for figuring out your business’s key performance indicators (KPI’s). Activities on this report will all fall into one of three categories- operating, financing, and investing.

In Conclusion (Status Report!)

It’s important to know your financial reports to determine your business’s financial standing. It allows you to financially direct every dollar of your business and improve your overall bottom-line and profitability.

To help you get the know-how and “status” report on your business to make it more profitable, Business Development Associates (BDA) is offering you a FREE Gift in the form of a Profitability Assessment that is a value of $1,997. Contact me directly by email to schedule an initial discovery call to discuss your profitability.

May the Profits Be With You!

John Capponi, CR | Operations and Management Consultant
Business Development Associates, Inc.
john@gobda.com | Cell: 407-745-7698

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