Most small business owners haven’t thought about it enough to have an opinion on the assertion that every business needs financial statements no matter your size and that is a huge mistake on their part.
I know that financial statements can be confusing and the accountants that typically create them like to use words like debits and credits that are confusing to us laymen.
I want to dispel the myth that your business is too small to utilize financial statements. Financial Statements are for everyone who is in business, and you need to be paying attention to them. If you aren’t already, then you absolutely need to start today.
The links below are for previous posts that I’ve done as well as whiteboard video sessions where I explain in more detail about the various financial statements, so please feel free to click on them to get a better understanding of the details.
Every Business Needs Financial Statements No Matter Your Size
When I say financial statements, what I am talking about are the Big 3 Financial Statements. Each of them have multiple names, probably so that the accountants can try and keep us confused and in the dark, but their most common names are the Balance Sheet, Income Statement and Statement of Cashflows.
If you think that you business is too small to have to worry about financial statements, then you have a mindset issue that you need to deal with.
A common theme from some of the reading and training that I have done over the past few years is that if you think small in your business and life too for that matter, then that will become your reality.
Those thought patterns of “smallness” will be a self fulfilling prophecy, and you and your business will always remain small.
If on the other hand, you are able to step outside of your comfort zone and grow to become bigger than you are, you will grow into those bigger shoes.
Money and finances are the largest aspect in your life and your business where that small view manifests itself and you need to work through that, but today we are talking about financial statements, so let’s get to it.
I want to dispel the myth that you can’t learn about financial statements, and in fact I want to argue that they are critical to your success no matter what size your business is today. They are just as critical, if not more so for the owner of a small business as they are for the big companies.
For years I was of the same mindset that financial statements were only for the big guys, and that though was reinforced by my CPA at the time that refused to create them for me.
I was submitting a bid for a government contract and one of the required elements of the proposal was 2 years worth of financial statements. I pulled something together to add to the proposal, but maintained the thought that if my CPA wouldn’t even create them for me, how important could they be.
Over time I came to the conclusion that I needed a new CPA, but I’ll leave that story for another post.
When I found a mentor that explained financial statements in terms that I understood, and demonstrated to me their importance even to a small business like mine, that was a real eye opener (and the final straw for the old CPA).
I now produce and review financial statements for my small business every month, then roll those up to a quarter and year. That change in mindset has made a significant impact on the success of my business.
When I review those statements it gives me valuable information for how my business is doing over the short term, but more importantly I can see longer term trends and even use them to forecast the future. I can do “what if” projections to see how increasing revenue or decreasing expenses or other changes will impact the future.
Do you see now that every business needs financial statements no matter your size?
If this topic caught your interest, I have more details in a free download of examples, templates and video trainings.
Do you produce financial statements for your small business? Does your CPA or Bookkeeper do it for you? Do you review them monthly?
Tell me about your experiences in the comments below, I’d love to get some other thoughts and perspectives and a Like would be fantastic as well.