Financial statements are used by a business for a number of very important reasons, so it is important that all managers of a business have a basic understanding of how to read and use these statements to help drive the success of a business.
- Report Card: They are used on regular basis as your report card on how your business is doing. Comparing actual results to budgeted amounts and previous years can help identify trends in order to make changes in operations, marketing and sales more timely.
- Borrowing Funds: If the company borrows funds or intend to borrow funds, well-prepared financial statements are crucial to maintain your ability to borrow funds.
- Company Strength: Some of your suppliers and outside investors may require you to show your financial statements on a regular basis and be able explain how they represent your company’s activities.
- Tax Returns: In order to properly file annual tax returns you will need to be able to produce year-end financial statement for you tax preparer. These are easily explained if the company produces and reviewed regularly.
Having reliable financial statements and being able to understand them is crucial to the success of a business.
Contributed by Joe Irish, Siena Wealth Advisors.
View the on-demand webinar “Financial Statements 101: A Primer for Non-Financial Managers” with Joe Irish.