Do you know what your financial statements are telling you about your business? Unfortunately, many business owners don’t take the time to read and analyze their financial statements, which can be a big mistake. So, Edgewater CPA Group is here to discuss four secrets your financial statements can reveal about your business.
1. Cash Flow Isn’t What it Seems
Many business owners are under the impression that they have more money than they actually do. That’s because they focus on the net income of their business, which is the profit after all expenses have been paid. However, this doesn’t take into account the fact that a business’s expenses usually exceed its income. Businesses that have a negative cash flow are at a high risk of going bankrupt. To avoid this, it is important to track your cash flow on a monthly basis and make sure that your expenses are not exceeding your income.
2. You Have More Overhead than You Realize
If you get into the habit of reviewing your financial statements, you might soon realize you have more overhead than you thought. Depending on your business, small expenses can add up. For many companies, these include monthly operational subscriptions like the internet and television. For others, this might include repairs to company trucks and vehicles. No matter what, these expenditures will be noted in your financial statements and give you the power to make some crucial business decisions.
3. The Business Needs a Health Check
When you review your financial statements, you may find that your business needs a health check. This means that you need to take a closer look at your expenses and income and make sure that they are in line with each other. If they are not, then you need to take action to fix the problem. If you find that your business is not doing well, don’t panic. One of the most important things is to make sure that your expenses are in line with your income. You may also want to consider scaling back on some of your expenditures or expanding your customer base.
4. Your Borrowing Power is Low
If you review your financial statements, you may find that your business is not in a good position to borrow money. This is because your debt-to-equity ratio will be high. The debt-to-equity ratio is a measure of how much debt a business has compared to how much equity it has. A high debt-to-equity ratio means that the business is not in a good position to borrow money because it doesn’t have enough equity to cover its debts.
Let’s Take a Look at Your Financials
Are you looking for reliable and knowledgeable CPAs that can review your financials and help improve the health of your business? Then, call Edgewater CPA Group in Carmel, IN. We proudly work with businesses of all sizes around the area, helping them improve their profitability and bookkeeping. So call (317) 386-7021 to schedule your consultation today.