<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=351166518341071&amp;ev=PageView&amp;noscript=1">

Why are Balance Sheets Important for Small Businesses? [Infographic]

May 10, 2016 8:22:00 AM / by Brian Paulson posted in small business accounting

balance-sheets-accounting.jpg

Balance sheets offer a quick view of a business’s financial health. Having the proper understanding of your balance sheet allows you to make decisions moving forward based on spending and earnings. As a major financial statement, a balance sheet shows information based on assets, liabilities, and equity.

Assets are any items your business owns; liabilities are payments your business needs to make; and equity is the amount you (as the owner) and/or your shareholders own. Ideally, assets should be equal to (balance out) the liabilities and equity.

Unfortunately, many owners discover their business is in financial trouble after it's too late. Balance sheets are important tools to help small businesses identify issues before they become major problems.

The following infographic prepared by OPENForum.com decodes the basic equation used to prepare a balance sheet.

 

balance_sheet_infographic.png

Typically, if your balance sheet ratio between assets and liabilities is less than 1-to-1, you may need to implement new strategies to improve the stance of your business. In addition to providing small business owners with a snapshot of their financial standing, balance sheets are also important documents for securing loans of lines of credit.

Is it time to update your monthly financial statements? Consider using an accounting and bookkeeping service to keep you on the right track. Download our Accounting Cost & Value Comparison to help determine the level of service best suited for your small business. 

New Call-to-action

 

Brian Paulson

Written by Brian Paulson

Brian received his Bachelor’s degree from the University of North Dakota with a double major in accounting and financial management. He’s a member of both the National Society for Tax Professionals and the National Society for Accountants and serves on the board of directors for the Professional Association of Small Business Accountants.

Comments

WE MAKE YOUR ACCOUNTING AND PAYROLL EASY, 
SO YOU CAN FOCUS ON GROWING YOUR BUSINESS

MEET WITH AN ADVISOR