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Today you're gonna learn about business financial statements and
why you need to care about them for your business.
Hi, Paul Monax here of AgileWealth.com
where I help small business owners understand the money and finances in your business.
Now there are many financial statements out there that accountants create.
And all the big corporations that report their numbers to wall street have many more
because the SEC requires them, but we as small business owners for us really
there's only three.
Three big financial statements that we care about.
The big three the balance sheet
income statement
and statement of cash
and that's it just those three.
Those are the three that you need to care about as a small business owner.
You can either create them yourself or you can have your bookkeeper or your
accountant do it for you but
you need to be doing it on a periodic basis whether it be
annually
quarterly or what i recommend especially in the beginning is that you're doing it
monthly every single month you need to be looking at the financial statements
in your business so you can know how your business is functioning
and cut any kind of issues or problems, nip them right in the bud early
If you wait for a whole year and only review your financial statements every
single year then some could have been an issue or a problem
for a long time before you
figure out that it's going on and because every single business is unique
the numbers that the story
in your business tells you it is going to be unique is well
you need to be looking at that on a regular basis monthly is what i
recommend to see what your business is doing how it's going what kind of sales
you're doing what kinda expenses you've got
how is your cash looking and your Cashflow.
Are you profitable?
You compare that to the previous period
last month last quarter last year
to see if you're making improvements year over year or whether you're going
to the wrong direction and your businesses
bleeding cash from month to month. If your business is bleeding in cash from
month to month
then the Statement Cashflows is gonna tell you that. It's going to tell you what's
going on with your business
and if you're
cash flow positive which any business that's gonna succeed over the long term
Must be cash flow positive
if you're losing money
you're losing cash every month, if your cash is going down every single month
or every other month
your business is gonna
not exist it's going to go out of business
because your business can't
function properly if you
have a decrease in cash flow from month to month to month
The same with your Balance Sheet and your Income Statement. statement
They're all going to tell you different stories of your business from a
different perspective in a different picture
There gonna give you
when you look at them in total, in whole that three of them together
the balance sheet, the income statement and the statement of cash
In total the picture that they show you is gonna be pretty accurate
reflection of how your business is doing
and whether or not it's gonna survive and stay in business
for the long term or whether or not
your business is going to be out of business,
because you're spending more cash than is coming in
Or you've got higher expenses than your income is coming in.
Now I know those sound kinda similar but they're not.
Income and cash and not the same thing.
If you've got,
you're generating a lot of sales but people aren't paying their bills you've
got a big amount of
receivables on your books
then you're going to go out of business because you can't pay those bills
because you don't have the cash.
You might have the income but not the cash
So, you gotta look at them in conjunction as a whole all three pieces
are critical elements to whether or not your business is functioning properly
and once you figure out how to read those statements it's really straight
forward the format is the same month-to-month
every single month
you get the same format for each of them
the big three financial statements and you can look at them and it's really
quick to tell
whether things are better or worse than they were in the previous statement
the previous period. Okay so if you found this video helpful for a
better understanding of the money and finances in your business and you want more,
then head on over my website at AgileWealth.com/m12
and register for a
free download. The link is straight down below the video here.
You can go check out and download a package
that I put together that's got examples, templates and more videos on
understanding the finances and the financial statements of your business.
It is absolutely critical for the success of your business for you to understand
how the money and finances work so get the education you need just click on the
link down below and go to AgileWealth.com/m12 and get that free download.
Thanks a lot and Have a prosperous day