Video of the Week: Financial Statements Overview

While you get your personal finances in order, make sure your business finances (or projected finances) are in order. The best way to do this is to keep financial statements - profit and loss/income statement, balance sheet, and cash flow statement. Below is a great, short video on the basics of what these are and what they mean:




When pursuing financing, all of these statements are very important to have as they let others know how well you are doing financially and help make sense for why you need financing. If you are not already in business,
projected financial statements provide a glimpse of how viable the business plan is and how realistic you are in your planning. It is an accepted fact the projections are only estimates but these estimates still have to make some sense. Explaining your assumptions is key to providing sense for your estimates (and making sure they relate to statements made in the business plan). For example, don't say in your marketing plan that you will take out billboards and TV advertising to market your business then only show a marketing budget of $100 - this would not make sense. If you show in your assumptions and throughout your plan that you priced these methods and determined you could get a group of interns to produce your TV ad for free, show the ad on public television for free, then get a great deal on a billboard space and do the ad yourself all for $100 - sense would be made!


Financial statement templates can be found all over the internet - you can find many free resources here. If you are unclear of what to do or your business gets very complex, definitely reach out to a dependable, knowledgeable CPA. A person who knows how to speak in your terms and understands your industry.

Are you using financial statements in your business? Do you have a preferred method of keeping track of your business finances? Have any resources to share for others to understand this aspect of business ownership? Please share in the comments below.