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Your Financials - A Book Worth Reading

 

Your sweat & tears invested in the buildup of solid financials is always worth only as much as you read it! This story always has a moral!

 

 

Your Financials: A Book Worth Reading

 

Does your company have solid, accurate books? If so, you’re fortunate! Your financial records are like a reality novel, rather than fiction, narrating the true story of your business. But to benefit, you need to engage with the tale it tells. As a small business owner, consistently reviewing your financial statements is the ultimate favor you can do yourself, allowing you to make strategic, timely decisions while circumstances unfold.

 

Let’s briefly explore three essential yet simple reports that every business owner should avidly read:

 

Balance Sheet

This report shows balances of your assets, liabilities, and equity at a specific point in time, illustrating how your assets are funded/balanced — whether by debt, or by earned or contributed equity. There’s so much to learn here, but, regularly reviewing it reveals trends in your company’s fiscal health, net worth, working capital, solvency etc.

 

Income Statement (P&L)

See your sweat & tears in action! Keep looking at your revenue, COGS, and operational expenses, over any  period in time. As simple as it sounds, it always blows my mind to see how financially grounded a business-person can become by simply ‘studying’ their income & expense data. Tip: Generate a P&L comparative to a prior similar period and breathe in some raw analytics, helping you gauge alignment with projections and identify ways to improve profit margins.

 

Statement of Cash Flows

“Isaac, you're telling me I netted X.xm this year, where in the world is the money??” - I’d be loaded if I’d received a quarter every time I get this question. This report clarifies cash movement by reconciling accrual to cash basis, showing cash flows that do not affect your P&L, grouped by operating, investing, and financing activities. Study this, and bingo! you’ve tracked down the status of your funds. 

 

Always collaborate with your CPA or financial advisor for deeper insights, but make a habit of regularly reviewing your own financials with a realistic eye —it’s the best book to read and the best investment you can make in your business.