In order to grow and succeed, you need to effectively manage your finances and monitor the health of your business.<\/p>\n\n\n\n\n\n\n\n
Previously, we looked at what management accounts are and how you can make the best use of them.<\/p>\n\n\n\n
However, understanding how to read these is perhaps the most important part of all.<\/p>\n\n\n\n
Profit and loss statement<\/strong><\/p>\n\n\n\n When it comes to reading and understanding a profit and loss statement, there are multiple things to consider.<\/p>\n\n\n\n Not only will it provide you with a better grasp of your expenses, including salaries and benefits, but it is also a great way to examine your revenue, by recording any activity and income from sales.<\/p>\n\n\n\n Most profit and loss statements include a gross margin calculation. This shows you how much money your business has for operational purposes. <\/p>\n\n\n\n Additionally, you can compare your financial position from the current year to those that have passed, to determine whether profits are increasing or decreasing.<\/p>\n\n\n\n Balance sheet<\/strong><\/p>\n\n\n\n Your balance sheet aims to summarise your assets, liabilities, and owners\u2019 equity.<\/p>\n\n\n\n The data included in a balance sheet will typically be structured as Assets = Liabilities + Owners\u2019 Equity.<\/p>\n\n\n\n By definition, an asset is anything owned by your business that holds value, whereas a liability is something that your business owes.<\/p>\n\n\n\n Lastly, owners\u2019 equity is what\u2019s left over after your liabilities are accounted for and deducted from your assets.<\/p>\n\n\n\n Cash flow statement<\/strong><\/p>\n\n\n\n The cash flow statement is typically split into three parts.<\/p>\n\n\n\n Operating activities include revenue and expenses, referring to the cash flow that\u2019s produced once your usual goods or services are delivered. <\/p>\n\n\n\n Investing activities consist of cash flow generated by buying or selling assets using free cash. <\/p>\n\n\n\n Thirdly, financing activities refer to cash flow that comes from both debt and equity financing.<\/p>\n\n\n\n For more information on management accounts and how to utilise them, keep an eye out for the next blog in our series.<\/p>\n\n\n\n Need advice? Contact our team today.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" In order to grow and succeed, you need to effectively manage your finances and monitor the health of your business.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26,33],"tags":[],"class_list":["post-19861","post","type-post","status-publish","format-standard","hentry","category-blog","category-business-blog"],"yoast_head":"\n