You may think to yourself, “I have a bookkeeper so I don’t need to know this”…I understand, but in fact you DO need to know all about your financial statement because of all the extremely important little accounting things that make up the build of the financial statement.
The ladies start the analysis off simple by stating your financial statement is the document that shows what your business has been doing. This little statement holds so much power it is the ONLY way for someone (like your bank) to gage where your business is financially. How much cash do you have? How has your business been performing? What are you spending money on? Your financial statement holds the answers to all of those scary questions. Before we move on, the financial statement INCLUDES your cash flow and your balance sheet. If you need a refresher, please listen to:
EPISODE 2- WHAT IN THE ACTUAL WORLD IS CASH FLOW?
EPISODE 3- THE POOR BALANCE SHEET
Dr. Cortney and Ashley then cut a little deeper as they bring in the profit and loss or income statement. The P&L is considered a “bucket” on your financial statement (as well as your cash flow and balance sheet), but underneath that bucket can be little tiny sub-buckets and who knows what goes in there?! Well here we go…on the P&L you have your sales, an example would be what is the price you are selling your product for? Underneath your sales you have your cost to produce said product so the actual production-this is called your “cost of goods”. If you subtract your cost of goods from your sales then you will get your gross profit, or how much money you made by selling your product.
Still lost? I again understand. Check out this blog post “ANALYZING FINANCIAL STATEMENTS TO INCREASE PROFITS”
In a nutshell, these scary words really aren’t all that scary. This is simple math if done correctly that will keep your finances in check! Need an accountant to take care of all of this for you? Ashley Altum, CPA is your girl! Need help getting your business on track? Dr. Cortney Baker is here to save your day!