Unlocking the power of financial statements for small businesses

Financial statements are often overlooked by small businesses as mere compliance tools for tax purposes.

These statements, including the income statement, balance sheet, and cash flow report, hold valuable insights that can guide strategic decision-making and help businesses thrive in the long term.

Courtney Kincaid, CEO and President of the Indiana Society of CPAs highlighted the importance of understanding and utilizing financial statements for small business owners.

Financial statements provide a comprehensive view of a company’s financial health, both in the short and long term.

While they are commonly used by lending institutions and investors to assess a business’s sustainability and growth potential, small business owners can also benefit from creating and reviewing financial statements on a regular basis.

Many small business owners may only prepare financial statements annually for tax purposes, but creating them monthly or quarterly allows for more frequent check-ins and informed decision-making.

Small business owners should also consider the differences between cash-basis and accrual-basis accounting when creating financial statements. While cash basis accounting is simpler and more familiar to many, accrual basis accounting provides a more accurate picture of a business’s long-term financial health.

Small business owners should recognize the power of financial statements as strategic tools for guiding their businesses. By creating and reviewing financial statements on a regular basis, businesses can gain insights into their current financial health and make informed decisions for long-term success.

For more in-depth knowledge about accounting and bookkeeping, it’s recommended to consult with accounting experts or visit reputable online resources.