Do you know what the single greatest thing an Entrepreneur can do for his business is?
No, it's not networking.
No, it's not talking to customers.
It's not even reading another book.
It's understanding FINANCIAL STATEMENTS!
Dollar for Dollar- Minute for Minute, there is NOTHING that has a higher Return on Investment than being able to UNDERSTAND FINANCIAL STATEMENTS.
But the fact of the matter is - UNDERSTANDING FINANCIAL STATEMENTS is not easy.
It takes Time and Effort!
Hell...ENTREPRENEURSHIP takes Time and Effort!
Entrepreneurship IS a tough path.
First, your handling unhappy customers...
Next, your pacifying disgruntled employees...
Then your rushing to the next Business meeting...
Hey, I get it.
I've been there...
Here's the TRUTH about Successful Entrepreneurs.
BUSINESS OWNERS that UNDERSTAND THE NUMBERS WILL do better than Business Owners who don't.
(Ever binge watched episodes of Shark Tank? What do you think the Sharks have in common? Despite being in different industries....they ALL Understand the Numbers)
But, what EXACTLY do you need to Understand?
YOU NEED to UNDERSTAND Financial Statements!
In fact, YOU NEED to LIVE Financial Statements!
YOU NEED to BREATHE Financial Statements!
ONLY THEN....DO YOU STAND A CHANCE TO MAKE IT IN THE RUTHLESS BUSINESS WORLD!
It's pretty simple actually.
Financial Statements ARE Progress Reports.
These 'Progress Reports' summarize how a Business is doing.
Understanding them would allow you as a Business Owner to diagnose problem areas in a Business and catch problems even before they happen.
Yes, I said BEFORE they happen.
PROBLEM #1: Financial Statements help you see a drop in Sales.
SOLUTION: You see a drop in Sales - you increase your Sales and Marketing spend.
You get more customers.
PROBLEM # 2: Financial Statements help you see any Inventory balance piling up.
SOLUTION: You do an Inventory check to see what Inventory is obsolete.
You drop your prices to sell the slow-moving stock!
Cash comes in, and you aren't stuck with Inventory in your warehouse which would have eventually become worthless.
Another one down.
See, how easy this is!
But, it all comes down to you understanding your Numbers.
So, you ask -
The 3 Main Financial Statements you should dig into FOR NOW are-
Perhaps, no other report keeps C.E.O's of Major Conglomerates on Wall Street up at night then the Income Statement.
The Income Statement Reports the company Sales
It reports the company Expenses
and most importantly it reports on a Company's PROFITS!
And on Wall Street....C.E.O. Bonuses are based on this silly!
It's all about the moneeeey!
The more earnings for the company, the Fatter the C.E.O.s Cheque!
This is the FIRST Financial Statement I recommend you understand.
So, TAKE a DEEP DIVE into UNDERSTANDING THE INCOME STATEMENT by clicking here.
While The Income Statement reports how well a Business has done over a period-
The Balance Sheet reports the RESOURCES a BUSINESS OWNS.
The LIABILITIES a BUSINESS owes.
AND THE OWNERS PORTION of the BUSINESS.
Whatever decisions a Business makes effects one of these areas.
In a nutshell, The Income Statement tells us how a company handles its operations, while the Balance Sheet tells us how well it manages its resources.
TAKE a DEEP DIVE into UNDERSTANDING THE BALANCE SHEET by clicking here.
Cash is King!
Whatever you prefer.
We prefer to be Gender Neutral on this website.
Since Cash is SOO IMPORTANT in a Businesses life...The Accounting world decided to come up with an entire report summarizing the workings of CASH in the Business.
It's called the CASH FLOW STATEMENT, and you can learn more about it by clicking here.
There are a few other Financial Statements such as the STATEMENT of SHAREHOLDER's EQUITY and the STATEMENT OF RETAINED EARNINGS which are also important, but I think let's take our learning of FINANCIAL STATEMENTS one step at a time.
Work Hard, Enjoy Life.
The content provided on accountingsuperpowers.com and accompanying courses is intended for educational and informational purposes only to help business owners understand general accounting issues. The content is not intended as advice for a specific accounting situation or as a substitute for professional advice from a licensed CPA. Accounting practices, tax laws, and regulations vary from jurisdiction to jurisdiction, so speak with a local accounting professional regarding your business. Reliance on any information provided on this site or courses is solely at your own risk.
Tax and accounting rules and information change regularly. Therefore, the information available via this website and courses should not be considered current, complete or exhaustive, nor should you rely on such information for a particular course of conduct for an accounting or tax scenario. While the concepts discussed herein are intended to help business owners understand general accounting concepts, always speak with a CPA regarding your particular financial situation. The answer to certain tax and accounting issues is often highly dependent on the fact situation presented and your overall financial status.