One of the strengths of WCL is ensuring clients to get a better grasp of all their numbers at any point in time.
There are traditionally three main financial statements that any business owner should aim to understand. These are:
We find that clients are well versed in understanding the first two, however, the third one is traditionally a real blind spot. Everyone gets the fact that they sell something for X and that has cost them Y to buy (Profit and Loss) and they can also see the cash that is sitting in their bank account and will they have enough to pay the wages at the end of the month (Cashflow). The balance sheet however seems to have a certain myth about it, but one could argue that this is the most important of all three!
The balance sheet pulls together all the “good news” in the business and compares it to the “bad news.” Good news, or assets, would be things such as stock, monies owed to you from customers and cash in the bank. Bad news, or liabilities, would be things such as monies you have to pay out to suppliers and VAT and PAYE. So, the question is, if you do not review your assets and liabilities on a regular basis, then how can you plan for the future?
Once you get a better grasp of your balance sheet, you can start to look at how efficient your business is in generating cash. Assets such as trade debtors and stock can in fact cause you a cash issue, and so we are not entirely sure that the name asset is appropriate! Slow debtor payments and dusty overstocks can in fact kill a business…but if you are not monitoring them on a regular basis, then how do you know what is around the corner?
Every set of management accounts, forecasts and budgets we produce for clients integrate all three financial statements to ensure that they have the best tools available to them to manage their business.
If you feel therefore that you are currently driving your business without a complete financial roadmap to assist you, then please feel free to get in touch at [email protected] and we would be pleased to help.