3 Money Reports I Need to Start A Business - Women's Business Resource Community

Money reports for small businesses is a topic most individuals don’t think about when wanting to jump into business. Knowing what money reports, you need to start a business is one of the steps many entrepreneurs skip over. Why? That is a great question. But keeping accurate financial records is essential for any small business. It helps you to track your income and expenses, identify areas where you can save money, and make informed decisions about your business.

Benefits of Money Reports

There are many benefits to keeping accurate financial records, including:

Helping you to track your income and expenses: Accurate financial records allow you to see where your money is going and where you can save. This information can be useful to make informed decisions about your business, such as where to allocate your resources and how to price your products or services.
Identifying areas where you can save money: By tracking your expenses, you can identify areas where you can save money. This could include negotiating better deals with vendors, finding cheaper alternatives to products or services, or eliminating unnecessary expenses.
Making informed decisions about your business: Accurate financial records provide you with the information you need to make informed decisions about your business. This could include decisions about pricing, marketing, expansion, or hiring.
Complying with government regulations: Many government regulations require businesses to keep accurate financial records. This includes taxes, payroll, and licensing. By keeping accurate financial records, you can avoid fines and penalties.
Attracting investors and lenders: Investors and lenders want to see that you have a solid financial foundation. Accurate financial records can help you to attract investors and lenders and secure the funding you need to grow your business.

If you are a small business owner, it is important to keep accurate money reports, aka financial records. Before jumping into the nit and gritty of the three main money reports you need for your business, let’s review some simple recommendations for keeping accurate financial records.

Recommendations for Accurate Records

Use a system that works for you: There are many different ways to keep financial records. Find a system that works for you and stick to it.

Enter your information regularly: The sooner you enter your information, the easier it will be to keep your records accurate.
Reconcile your accounts regularly: Reconciling your accounts means comparing your bank statements to your records to make sure they match. This is an important step in ensuring the accuracy of your records.
Back up your records regularly: In case of a disaster, it is important to have a backup of your records. You can back up your records to a cloud storage service, an external hard drive, or even a USB drive.

Keeping accurate financial records is an essential part of running a successful small business. By following these tips, you can ensure that your records are accurate and up to date.

What Money Reports Do You Need & Why

There are three main financial statements that you need when starting a business:

Balance sheet: A balance sheet shows your company’s assets, liabilities, and equity at a specific point in time. It is a snapshot of your company’s financial position.
Income statement: An income statement shows your company’s revenue, expenses, and profits over a period. It is a measure of your company’s financial performance.
Cash flow statement: A cash flow statement shows your company’s cash inflows and outflows over a period. It is a measure of your company’s ability to generate cash.

These financial statements are important for several reasons. They can help you to:

Track your company’s financial performance.
Make informed business decisions.
Attract investors.
Obtain loans.
Comply with government regulations.

It is important to note that the specific financial statements that you need will vary depending on the size and complexity of your business. However, the three financial statements listed above are a good starting point for any business owner. Now let’s dig into each of the three a little more.

Balance Sheet

The balance sheet is a snapshot of your company’s financial position at a specific point in time. It shows your company’s assets, liabilities, and equity. Assets are things that your company owns, such as cash, inventory, and equipment. Liabilities are things that your company owes, such as accounts payable and loans. Equity is the difference between your company’s assets and liabilities.

This report is a financial statement showing a company’s assets, liabilities, and equity at a specific point in time. Assets are things that a company owns, such as cash, inventory, and equipment. Liabilities are things that a company owes, such as accounts payable and loans. Equity is the difference between a company’s assets and liabilities.

The balance sheet is divided into two main sections: assets and liabilities. Assets are on the left side of the balance sheet, and liabilities are on the right side of the balance sheet. Assets and liabilities are then further divided into two categories: current and non-current. Current assets are assets that you are expecting to convert into cash or that you are going to use up within one year, while non-current assets are assets you are expecting to use up over a period of more than one year. Current liabilities are liabilities that are due within one year, while non-current liabilities are liabilities that are due over a period of more than one year.

Why is a Balance Sheet Useful

The balance sheet is a useful tool for understanding a company’s financial position. It can be used to assess a company’s liquidity, solvency, and financial strength. Liquidity is a measure of a company’s ability to convert its assets into cash quickly. Solvency is a measure of a company’s ability to pay its debts. Financial strength is a measure of a company’s overall financial health.

The balance sheet can be used to compare a company’s financial position over time. This can help to identify trends in a company’s assets, liabilities, and equity. The balance sheet can also be used to compare a company’s financial position to other companies in the same industry. This can help to assess a company’s competitive position.

The balance sheet is an important financial statement that can be used to understand a company’s financial position. It is a useful tool for investors, creditors, and other stakeholders.

Income Statement

The income statement shows your company’s revenue, expenses, and profits over a period. Revenue is the money that your company brings in from selling its products or services. Expenses are the costs that your company incurs to generate revenue. Profit is the difference between revenue and expenses.

This statement reports a company’s revenue, expenses, and profits over a period and is used to measure a company’s financial performance. It can help investors, creditors, and other stakeholders to understand how well the company is doing. The income statement can also be used to track the company’s financial performance over time.

The income statement is divided into two main sections: revenue and expenses. Revenue is the money that the company brings in from selling its products or services. Expenses are the costs that the company incurs to generate revenue.

The difference between revenue and expenses is called profit. Profit is the amount of money that the company has left over after it has paid all of its expenses. Profit can be used to reinvest in the company, to pay dividends to shareholders, or to repay debt.

The income statement is a valuable tool for understanding a company’s financial performance. It can be used to track the company’s financial performance over time, to compare the company’s performance to its competitors, and to make informed business decisions.

Detailed Explanation of Income Statements

Here is a more detailed explanation of the income statement:

Revenue: Revenue is the money that a company brings in from selling its products or services. Revenue is typically listed first on the income statement.
Cost of goods sold: Cost of goods sold (COGS) is the cost of the products or services that a company sells. COGS is calculated by multiplying the number of units sold by the cost per unit.
Gross profit: Gross profit is the difference between revenue and COGS. Gross profit is a measure of the company’s profitability before considering other expenses.
Operating expenses: Operating expenses are the costs that a company incurs to operate its business. Operating expenses typically include things like rent, utilities, salaries, and marketing.
Operating profit: Operating profit is the difference between gross profit and operating expenses. Operating profit is a measure of the company’s profitability before considering taxes and interest.
Net income: Net income is the company’s profit after taxes and interest. Net income is the amount of money that the company has left over after it has paid all of its expenses.

Cash Flow Statement

The cash flow statement shows your company’s cash inflows and outflows over a period. Cash inflows are the sources of cash that your company receives, such as from sales and from loans. Cash outflows are the uses of cash that your company makes, such as for expenses and for investments. It is divided into three main categories: operating activities, investing activities, and financing activities.

Operating activities are the activities that are directly related to the company’s core business operations. They include activities such as selling products or services, collecting payments from customers, and paying expenses.

Investing activities are the activities that involve the purchase or sale of long-term assets, such as property, plants, and equipment. They also include activities such as the purchase or sale of investments.

Financing activities are the activities that involve the raising or repaying of capital, such as issuing or repaying debt or issuing or buying back stock.

The cash flow statement is an important tool for analyzing a company’s financial health. It can help you to understand how much cash the company has available to pay its bills and to invest in its business. It can also help you to identify any potential problems with the company’s cash flow.

Benefits of a Cash Flow Statement

Here are some of the benefits of using a cash flow statement:

It can help you to understand how much cash your company has available. This information can be used to make informed decisions about how to allocate your cash resources.
It can help you to identify any potential problems with your company’s cash flow. If your company is not generating enough cash to cover its expenses, it may be in financial trouble.
It can help you to track your company’s financial performance over time. This information can be used to identify trends in your company’s cash flow and to make adjustments as needed.
It can help you to attract investors and lenders. Investors and lenders want to see that your company has a strong cash flow. A good cash flow statement can help you to convince them to invest in your company.

If you are a business owner, it is important to understand how to read and interpret a cash flow statement. This information can help you to make better decisions about your business and to ensure its financial success.

Conclusion

It is important to note that financial statements can be complex and time-consuming to prepare. If you are not comfortable preparing your own financial statements, you can hire a certified public accountant (CPA) to do it for you.

There are many benefits to accurately keeping track and using money reports for your business. Doing so includes helping you to track your income and expenses, identify areas where you can save money, make informed decisions about your business, comply with government regulations, and attract investors and lenders.

Recap: 3 Money Reports I Need to Start A Business

Starting a business without understanding the importance of financial reporting is a grave mistake many entrepreneurs make. It’s high time we realized that maintaining accurate financial records is paramount for the growth and success of any small business. By doing so, you can efficiently manage your income and expenses, discover opportunities to save money, and make informed decisions that propel your business toward greater heights! Need support and guidance to kick your small business off with a bang? Or how about growing and knowing with confidence the next steps you need to take? Join Get Savvy today and be a Go-Gether in business.