Keeping track of income and expenses is important, but why is it important to have an accurate Balance Sheet? In fact, what is a Balance Sheet?
The Balance Sheet is one of the most basic and telling financial report that can be generated for a business. Using the information recorded on your books, the Balance Sheet is a snapshot of a company’s financial health. It shows the assets (everything that makes the company worth money), the liabilities (what money a company owes to others), and the equity (monies belonging to the company owner).
Assets include bank accounts, Accounts Receivable (anticipated income from invoices sent), and fixed assets. Fixed assets include land, buildings, vehicles, and equipment.
Liabilities include loans to the company. The loans can be for Assets, like a vehicle. This section also encompasses credit card balances, payroll liabilities, and Accounts Payable (money owed to vendors).
Equity will show money paid out to owners or shareholders, as well as any money invested by owners or shareholders.
When this information isn’t reported correctly, it can hurt the chance of obtaining funding or selling a company. If the Assets aren’t documented, it will make the company’s value appear less than it is. On the other side, if the Liabilities aren’t recorded properly, it can make a company look like it has more money than it does. If these figures aren’t correct, how can an outsider determine the worth of your company?
A good bookkeeper will make sure to provide updated financials on an agreed upon schedule. In most cases, this will be monthly as the information is verified for accuracy during end of the month reconciliation.
A great bookkeeper will educate a company on their financial reports, taking the time to ensure that the information reported is understood and accurate.
Are your assets reported correctly? Are your liabilities up to date? Is your Accounts Receivable or Accounts Payable out of whack? A certified bookkeeper can answer these questions.
Contact us today for a consultation.