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Grow Your Business by Sorting Out Your Balance Sheet

Stocksy_see saw balance sheet (1).jpg

 

Imagine if managing your money was straightforward, painless and fun. Can’t imagine it? If you’re like the majority of people who work for themselves, you’re not alone. The good news is, it’s not as hard as you may think to understand your sums. Just focus on 3 key documents to chart a course for financial success: your net income statement, your cash flow statement and—the topic of this article—your balance sheet.

 

Why you should care about your balance sheet

Essentially, your balance sheet gives anyone who’s looking—including potential “suitors” like the bank or an investor—answers to important questions. It tells you if you’re managing debt responsibly or putting the business at risk. It shows whether you’re invoicing customers regularly and on time. And it proves you’re not spending or investing money you haven’t yet earned.

 

Think about your balance sheet as your online-dating profile, social media page, modelling headshot and CV all wrapped into one. Then you’ll understand how important this document is—and how much it reveals about you and your approach to running a business. And once you get your head around your business’s finances, you’ll be primed and ready to grow your equity.

  

What your balance sheet should include

Your balance sheet should be divided up into 3 sections:

 

  • Assets are what you own. This includes cash and accounts receivable (which you should monitor on a weekly basis) as well as your company’s inventory (including land, equipment and the like)
  • Liabilities are what you owe. This could be anything from a bank loan to rent, to an employee’s wages
  • Equity is what’s left after you subtract liabilities from assets

List out all your assets and their worth in a spreadsheet, asset by asset. Then list all your liabilities and their cost. Now everything is laid out clearly. This way you’ll be able to monitor everything closely without feeling overwhelmed—and your equity will be plain to see.

 

Here’s the rule of thumb for a winning balance sheet: Grow your assets faster than your liabilities. When this happens, one day your owner’s equity could become so robust that you’ll choose to sell your business for vast sums of money.

  

Plan for the unexpected

While you’re growing your assets to overcome your liabilities, here’s a tip for staying solvent: take 10% of what you earn and put it away in a rainy-day fund. No excuses. Consider that money untouchable except during a true financial emergency. Because that rainy day will always come, even if the forecast calls for clear blue skies.

  

What other people think 

Here’s what other people who work for themselves have to say when it comes to keeping their money matters straight.

 

“I decided to figure out how much I was spending on vanilla lattes each month. I was so embarrassed by what I found that I bought my own machine and got a mug. I decided that was an “asset” worth investing in. (It made me want to open a coffee house, too!) It continually amazes me how small expenses and liabilities add up.” —Leslie Barber, QB Community leader

 

“‘So, many of us think about cash when we look backwards. My secret is in planning ahead. I know what bills are coming due in the next 30 and 60 days and can anticipate the cash I need to generate to pay them. Preparation helps me sleep at night.” —Victoria Cameron, QuickBooks ProAdvisor

 

“I sought out organisations that give grants and interest-free loans and applied. I actually got some funding.” —Victoria Beadz, jewellery designer

 

“So, many businesses go under due to ‘Death from 1000 Cuts.’ In other words, no one goes out of business in 1 day. Bankruptcy happens when we don’t manage the daily inflexion points. Chances are, we don’t even notice the ‘cuts’ that are happening every single day.” —Dawn Fotopulos, Author of Accounting for the Number Phobic: A Survival Guide for Small Business Owners

 

Want to learn more and explore more ways of balancing your money and getting ahead? Browse the links below! 

 

Before you go

Are you organised with your money? Is there anything you find stressful? Comment below!

8 REPLIES 8
Jess W
Intuit

Grow Your Business by Sorting Out Your Balance Sheet

A great post with some brilliant tips and guidelines. I think this is one for the bookmark list!

 

@Jerty20 I saw your query regarding balance sheets and I thought this article might be a good read for you. Let me know what you think in the comments below and I hope it offers some guidance for you! Smiley Happy 

 


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EmilyMockett
Level 7

Grow Your Business by Sorting Out Your Balance Sheet

Hi,

 

I have just finished uploading a whole section on my playlist within YouTube in regards to the reporting functions of QuickBooks Online and feel that this links quite nicely with this post. 

 

 

The Balance Sheet is one of the reports that we urge our clients to look at on a regular basis as well as the profit and loss and the aged receivables and payables. 

 

Emily

Jess W
Intuit

Grow Your Business by Sorting Out Your Balance Sheet

Hi @EmilyMockett !

 

That's a brilliant YouTube video, Emily. Thank you for contributing to this post!

 

 

 

 

Jerty20
Level 2

Grow Your Business by Sorting Out Your Balance Sheet

@Jess W Thank you for tagging me in this article.  Unfortunately it doesn't help the query I have.  

Jess W
Intuit

Grow Your Business by Sorting Out Your Balance Sheet

Hi, @Jerty20 !

 

You're welcome Smiley Happy. Here on the Community, we offer guidance and advice on a variety of subjects, so feel free to explore the boards and conversations below! If I can provide any guidance or additional help, please let me know.

 

I hope you have a great day!

 


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Valy
Level 3

Grow Your Business by Sorting Out Your Balance Sheet

 
salihagenter1
Level 1

Grow Your Business by Sorting Out Your Balance Sheet

Great post. Thank you for sharing. Agenter Books is a simplified gst accounting software to make your accounting activity more productive and result-oriented because we always strive to provide all the latest technology integration in an accounting system.

salihagenter1
Level 1

Grow Your Business by Sorting Out Your Balance Sheet

Great post. Thank you for sharing. Agenter Books is a simplified gst accounting software to make your accounting activity more productive and result-oriented because we always strive to provide all the latest technology integration in an accounting system.