Landscapers Association Newsletter Article
by Brenda Hodgkiss, CPA
“Show Me the Money”
Financial Statements for your business show you where your company’s money comes from, where it goes and where it is now. This is valuable information for you to know and to understand.
There are four basic financial statements:
- Balance Sheet
- Income Statement
- Cash Flow Statement
- Statement of Shareholder’s Equity.
Each serves a different purpose. Together, they tell the complete story to business owners, potential investors and potential lenders.
A balance sheet is a snapshot of a company’s assets (company owns), liabilities (company owes) and shareholder’s equity (owner investment plus or minus earnings since inception of the business). This snapshot is at the end of a reporting period (month, quarter, year). I recommend that a business owner review this statement at least monthly.
An income statement demonstrates how much revenue and expenses (costs) your company has over a specific time period. I recommend that business owners review this each month and their year to date “bottom line”. The “bottom line” demonstrates whether the company earned or lost during that period.
A cash flow statement tracks the inflows and outflows of cash. It is extremely important because your company requires enough cash to pay for the supplies, payroll and purchase assets when needed. The changes in the cash balance are derived from the balance sheet and income statement changes for the period. The “bottom line” of the cash flow shows whether your company generated cash.
A stockholder’s equity statement is the detail of the owner’s investment plus or minus the earnings since inception of the business and the current year’s net income.
What We've Achieved
This business owner separated from his original business. He contacted me when he opened his own shop. Accounting was the first thing he thought about. I worked with him and his sales staff to set up his QuickBooks. He does his day to day bookkeeping for accounts receivable
and accounts payable. I go into the office monthly to review all of the information, correct as needed, discuss his actual results versus his budget and file his sales taxes in multiple states. I provide year-end financial statements to his tax preparer.