If you’re a small business owner, you’re probably focused on growing your business through amassing enough inventory, hiring the right people, expanding your customer base through marketing, and so on. You may have not think you have time for accounting. And yet, accounting and bookkeeping are vital elements to your business’s success. One of the key accounting documents you need to be familiar with is the balance sheet.
Your balance sheet is a financial document that provides a snapshot of your company’s financial situation as of a certain date. It lists all your assets, or the things you own, as well as all your liabilities, or the amounts that you owe to others, also known as your accounts payable. Your assets are a combination of your owner’s equity, which is your investment in your company as the owner, and your accounts receivable. These are the amounts of money that others, typically your customers, owe to you but haven’t paid yet.
Your balance sheet can help you get an accurate sense of what your company is really worth. This information is important if you should decide to sell your company or if you want to apply for a business loan. You can use accounting software, such as QuickBooks, to create a balance sheet at any time, calculating not only your accounts payable and receivable but also your labour costs, your tax liabilities, and the depreciation and appreciation of major assets such as vehicles, equipment, and real estate.
As a small business owner, you need to keep accurate and thorough financial records that can allow you to create a balance sheet. By keeping this sheet up to date, you can better control the way your business grows.