Are you wondering how to keep your business’s finances in order? A financial statement is an official record detailing your business’s financial activity. The key to keeping an organized financial foundation for your business is by managing monthly financial reports. Opting for monthly financial reports over quarterly or year-end, allows you to spot trends and adjust regularly when needed. This helps control your business’s spending and creates room for financial growth.
Finances can be intimidating, that’s why our Vancouver accounting team at Genesa CPA can assist with the preparation of your financial statements to optimize your business. Here is how our accounting firm will assist in the proper preparation of your financial statements:
What’s Needed for Monthly Financial Reports?
There are three elements that make up efficient monthly financial reports for businesses:
- Balance Sheet
- Income Statement
- Cash Flow Statement
You may be able to calculate these yourself using computer software, however, monthly financial reports are often prepared by accountants for increased accuracy. Furthermore, some third parties such as bankers require that reports be handled by financial professionals, so it’s always wise to consult with your accountant.
Preparing a Balance Sheet
To prove the validity of your monthly statements, a beginning and ending balance sheet is used. A balance sheet lists the assets, liabilities, and owner’s equity of your business over a specific time period. To create a balance sheet, you’ll want to list your assets and liabilities to find your equity, and round these numbers to the nearest dollar. You can do this by splitting your page into two sections to list your assets and liabilities first.
- On the left side of the page will be your assets. This includes any cash on-hand or in bank accounts, the value of inventory and equipment, and any other financial assets.
- On the right side of the page, you’ll list your company’s liabilities. This is any money that your company owes such as credit card balances, bank loans, accounts payable, etc.
- Lastly, you’ll want to total the assets and liabilities separately, then subtract your liabilities from your assets. This final number is the owner’s equity.
Preparing an Income Statement
Also known as a profit and loss statement (P&L), an income statement details your company’s revenue, expenses, and net income (or loss) over a specific period. To prepare an income statement, you’ll need to record your sources of earnings and expenses during the time the statement will cover. Your income statement will essentially follow this formula:
Profit = Revenues – Expenses
- To calculate your business’s revenues (or gains), you’ll need to record all the income earned by your company during a period. This could be income generated from sales of goods and services or interest gained on investments or savings, etc.. Add these up first to calculate your total revenue.
- Secondly, you’ll want to look at your expenses (or losses). This will be a report detailing your company’s financial output over a period of time. Outputs such as salaries, rent, software fees, purchases of equipment, etc. are all sources of expenses. Once you’ve listed your sources of spending, add them up to calculate your total business expenses.
- Lastly, subtract your expenses from your revenue to determine your company’s profit for this period.
Monthly profit reviews will help your business determine areas of financial gain and loss on a regular basis. Doing this helps evaluate the health of your business and can allow you to make gradual adjustments to keep you on a successful course. Financial preparation services such as those offered at Genesa CPA, can determine areas of loss and provide realistic and attainable adjustments to increase revenue.
Cash Flow Statement
A statement of cash flow will provide a comprehensive overview detailing how your company spends and earns money over a period of time. While not always utilized by small businesses, cash flow statements show exactly how much cash is available. When your accountants at Genesa CPA prepare your cash flow statement, it will involve three sections:
- Operating Activities
- Investing Activities
- Financing Activities
These sections demonstrate how your company spends and earns money. It’s usually what investors scrutinize to determine how well your business is operating.
As a business owner, creating monthly financial statements is one of the best decisions you can make. This will provide an in-depth understanding of your company’s gains and losses, as well as determine the financial health of your business. As a top accounting firm in Vancouver, our team at Genesa CPA offers financial statement preparation and bookkeeping services for your business. Tailored to your needs, we will work closely with you to obtain a full understanding of your financial goals and provide solutions and strategies to optimize gain. Contact Genesa CPA today to further your business’s profit.