Most people will say it is by growth in sales or the amount of profit generated by the business. Others might say by the amount of cash in the bank, since in a small business cash is king. Either way, we need a method of keeping score, and the most common method is with regular financial statements. For this reason, it is important to regularly produce statements and understand what they ar
e telling us. In my previous business life, I can remember eagerly awaiting the monthly financials in order to check the score. In a small business, the key financial statements are the profit and loss (p&l) and the balance sheet. These financial statements are used by others when evaluating your business. Lenders use them when making business-loan decisions or when they are re-evaluating an outstanding loan. Suppliers use financial statements when deciding if they should extend credit. Certain government agencies may require financials. Most importantly, regular financial statements allow the owners and managers to understand the financial health of the business and make decisions to improve operations. The profit and loss statement should be created on a monthly, quarterly and yearly basis. It shows profit or loss from business operations over a period of time by taking revenue and subtracting expenses related to operations. This statement helps spot trends in sales and expenses as well as trends in profit margin. It is a good idea to also express expenses and profit margin as a percentage of sales, as this will make it easier to compare percentages across many different months.
e telling us. In my previous business life, I can remember eagerly awaiting the monthly financials in order to check the score. In a small business, the key financial statements are the profit and loss (p&l) and the balance sheet. These financial statements are used by others when evaluating your business. Lenders use them when making business-loan decisions or when they are re-evaluating an outstanding loan. Suppliers use financial statements when deciding if they should extend credit. Certain government agencies may require financials. Most importantly, regular financial statements allow the owners and managers to understand the financial health of the business and make decisions to improve operations. The profit and loss statement should be created on a monthly, quarterly and yearly basis. It shows profit or loss from business operations over a period of time by taking revenue and subtracting expenses related to operations. This statement helps spot trends in sales and expenses as well as trends in profit margin. It is a good idea to also express expenses and profit margin as a percentage of sales, as this will make it easier to compare percentages across many different months.For further details visit at : http://www.gosanangelo.com/news/2009/jun/01/financial-statements-keep-score-in-business/
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