Financial Statements

For small business owners, understanding financial statements is critical for success. The two key financial statements you need to know are:

1. Profit and Loss Statement: This statement summarises your business’s income, expenses, and profits over a specific period, helping you track financial performance.

2. Balance Sheet: This provides a snapshot of your business’s assets, liabilities, and net equity at a particular point in time, showing your business’s financial health.

Why Financial Literacy Matters

Understanding and analysing your financial statements equips you to manage finances effectively and make informed decisions based on data, not intuition. As a small business owner, reviewing a monthly Profit & Loss statement is essential. By comparing actual performance with forecasts, past years, and industry benchmarks, you can gain valuable insights into your financial standing without solely relying on your accountant.

At Bendigo Bookkeeping, we have a Qualified Accountant who can help explain your financial statements and guide you through the numbers to ensure you’re in control of your business’s finances.

Record-Keeping and Accounting Systems

Accurate record-keeping is not only a legal obligation but also the foundation for reliable financial statements. By establishing efficient systems to maintain up-to-date financial records, you can ensure access to the data needed for sound business decisions.

Popular accounting systems for small businesses include:

• MYOB
• XERO
• QuickBooks/Reckon

Each system offers online capabilities, and Bendigo Bookkeeping can help you choose the right package for your business needs.

The Value of Financial Analysis

Financial statements summarise key data about your business. Financial analysis goes a step further, converting this data into actionable insights by calculating ratios and percentages to track trends, compare with industry benchmarks, and assess overall performance.

• Why Ratios Matter: Ratios offer a meaningful view of your business only when benchmarked against previous periods or industry standards. For example, analysing liquidity ratios (cash flow) and profit margins (net profit percentage) can highlight potential issues early.
• Benefits of Financial Analysis: By regularly reviewing your financial health, you can identify problems, take corrective action, and improve operational efficiency.

Partner with Bendigo Bookkeeping

Proper financial analysis can empower you to optimise your business’s performance and profitability. At Bendigo Bookkeeping, we’re here to support you every step of the way.

Contact Maurie on 0418 573 667 or email maurie@bendigobookkeeping.com.au to learn how we can help you manage and grow your business.