An appropriate recordkeeping system and a thorough understanding of financial statements can determine the survival or failure of a new business. Owners of existing businesses often do not know how to keep good records or interpret the information in financial statements. Yet, accurate financial statements are an essential tool for assessing the performance of a business and its management team. For these reasons, it is important that you are able to help Clients understand the fundamentals of recordkeeping and how to read financial statements.
- Business Records: Starting a business on the path to success starts with good recordkeeping. Watch this video for general information about what kinds of recordkeeping one should have for tax purposes. For more detailed information, you may want to review IRS Publication 583, Starting a Business and Keeping Records.
- Bookkeeping: This website provides a tutorial that introduces basic accounting principles and will walk you through the monthly bookkeeping process. It is not intended that you become an expert in bookkeeping; this website is provided for those who want to increase their personal knowledge of bookkeeping and accounting.
- Understanding Financial Statements – The Balance Sheet: Having a good understanding of financial statements is a necessary skill for a Business Consultant. Being able to read and interpret a business\’ financial statements is essential if you are going to help an existing business owner understand the financial condition of his/her business. The balance sheet is one of the financial statements that can serve this purpose. Review this website for an overview of the balance sheet.
- Understanding Financial Statements – The Profit and Loss Statement: The profit and loss statement is another primary tool for understanding how a business is being managed. Go to this website for an overview of the income statement.
- Understanding Cash Flow: Cash is the lifeblood of a small business. Managing cash flow is essential to the day-to-day operations of a business. Read this article for an overview of cash flow.
- Analyzing Financial Statements: Once you have gained a general knowledge of financial statements, you should be ready to perform a basic analysis. Applying financial ratios is the primary method to do this. Learn how to calculate selected financial ratios here