Understanding your small business’s finances is key to business stability and growth. There are three basic financial reports that all business owners need to understand and interpret in order to manage their businesses successfully — the balance sheet, the profit and loss and the cash flow statement.
Having a strong understanding of financial reports provides the basis for sound management and allows business owners to establish policies that enable the business to succeed and grow.
Proactive Financial Management
It’s important to take a proactive role in understanding and managing small business finances. A reactive approach to financial management leaves business owners moving from one crisis to the next, with little time in between to notice new opportunities. Businesses that are managed proactively are more likely to be successful.
The following steps will help create a proactive approach to financial management.
- Read and analyze financial statements on a regular basis. A monthly review is ideal.
- Compare real financial data to the budgeted or projected data. Identify discrepancies or weaknesses before it is too late.
- Make any necessary changes to your budget before major problems develop.
Get Help Developing Financial Controls
Our team can assist you in setting up financial control processes. Our financial management series has been specifically designed to help business owners and managers take control of their finances.
Learn basic accounting terms and practices, understand what your financials are telling you, create a cash budget, and identify long-term strategies for planning a successful transition.
Attending the financial series will equip you to take a proactive role in managing your small business financials.