Why the balance sheet is the key to knowing your company’s health and value

You want to scale and optimize your small business which means you must always know it’s value. The health and value of your business are quantifiable by maintaining a monthly or quarterly balance sheet. The balance sheet goes beyond your financial plan or profit and loss statement to determining your financial position.

What Is A Balance Sheet?

A balance sheet is a calculation of your assets, liabilities, and equity:

Assets—anything of value that you own such as cash, equipment, inventory, accounts receivable, and property.

Liability—anything that you owe such as general debt, money borrowed from banks or lenders, accounts payable, and money owed to suppliers.

Equity—your assets minus your liability is your equity (net worth); the true health and value of your business.

Why Your Balance Sheet Is Important? 

Internally your balance sheet helps to keep you in check. You get a snapshot of what you own and owe and can easily see if you have any past due accounts. This is essential for making ongoing spending and financial decisions. It can also be used alongside your other financial statements to determine trends, ROI, and to compare your health and risk with industry standards.

Externally your balance sheet may be required to share with investors, shareholders, lenders—and depending on the size and type of business you own, for tax and regulatory purposes.

Need Some Help?

Taking a proactive approach to your finances is required for both sustainability and growth. While you can learn to do your bookkeeping and reporting yourself, having an outside perspective can help you identify areas of opportunity that you might miss on your own. In addition, a bookkeeper can share financial strategies to further minimize risk and optimize your financial success.

If you are looking for a way to lighten your load and improve the financial health of your business, we invite you to reach out to the team at KG Virtual CFO. We deliver the benefit of having a full-time CFO at a small fraction of the price. Reach out today to learn more!