Broadly speaking financial statements are a representation of your business as it was conducted during the last financial year. They are generally accepted by all international accounting bodies as a representation of the financial state of your business. A business consultant would use this company information to ascertain the financial viability, performance, and strength of your business. The 3 main statements are the Income Statement, Cash Flow Statement, and Balance Sheet. 

1.      The Balance Sheet - Shows exactly how much liquidity the company has at that point in time.

-          Assets: What the company owns – for example, equipment and machinery;

-          Liabilities: What the company owes, such as an overdraft or car finance loan;

-          Equity: What the company owes its owners – in other words, this is liquid cash – the more you have, the better off you are in terms of bargaining power and strength.  

2.      The Income Statement – or The Profit and Loss Statement. This shows the company’s profit or loss over the previous financial year.

-          Income: What the company has earned in the last 12 months –has the company made any money or lost any money? If your company has lost money, perhaps it is time to get some assistance from a business coach;

-          Expense: What the company has had to pay out in the last financial year, such as rent, utilities and salaries and wages.

3.      The Cash Flow Statement – is a representation of the funds going in and the finds going out of your company’s bank account, with a daily running total after every movement of cash whether in or out. Depending on your financial adviser, you can decide whether to have these funds separated into 3 categories or not: Operating Funds, Investing Funds and Financial Funds. 

From these figures, financial experts can make predictions about the future income earning potential of your business and whether it is a good, sound investment or not.  There is another ‘statement’ you can get on the state of your financial affairs called the Statement of Changes in Equity which is detailed information on the business owner’s financial position.  Each of these statements provides important information on the owner and the company and are well worth having. 

For more information about business coaching and business consulting services, contact me:   083 256-0378   |  This email address is being protected from spambots. You need JavaScript enabled to view it. 

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