Financial Statements Can Make or Break A Startup
6 min. Read
Last Updated: 01/20/2016
Table of Contents
Small businesses must speak for themselves and tell the world about their success. Communicating with potential investors and bankers is also essential in order to attract new funding and capital investment. One way of providing that information is by preparing a set of small business financial statements. Many financial experts use this standardized financial reporting format to look for the facts about a company and calculate profitability ratios to help analyze a company's performance.
From Receipts to Reports
Every business owner wants to walk into a meeting with a powerful graphic illustrating positive sales trends. Yet, transitioning from a pile of monthly sales receipts to a summary sales report may be a challenge for a multi-tasking business owner. With built-in customizable reporting features, cloud accounting systems produce reports that can show how well a company is trending. Alternately, when a company misses sales targets, management needs to identify areas for potential improvement. As long as revenues and expenses are kept up to date, a cloud accounting system retains the data needed to analyze the state of a business and highlight any budget shortfalls.
Preparing Small Business Financial Statements
Thanks to new accounting technology, small businesses can now generate financial statements at the press of a button. Cloud accounting systems store the accounting information entered by various users throughout the month. These continual, virtual updates are then used to prepare financial statements. As sales, expenses, and asset purchases are added, accounts will continually roll forward and assets, liabilities, income, and expenses are calculated. With a cloud accounting system, even small business owners with little accounting experience can produce a professional-caliber balance sheet and income statement. Additionally, cash balance, one of the most important numbers for every small business, can also be determined by simply rolling forward cash inflows and outflows in the system.
Projecting the Future
In addition to producing financial statements detailing past performance, companies need to prepare for future spending and growth. Pro forma financial statements incorporate expected expenses and profit based on growth trends and increased operational efficiency. Using a cloud accounting system, companies can predict future spending by projecting current trends into future years. This trend analysis provides the backup required for management to speak confidently of their anticipated earnings growth.
In our digital world, small businesses in need of capital investment are expected to maintain accurate financial statements. A cloud accounting system can generate the reports needed to assist with those statements and to support critical decision making. Before considering a business expansion or inquiring about investment funding, conduct research into a cloud accounting system and learn about its customized reporting capabilities.