To understand your business better, all owners and managers should review the financial statements of their business at the beginning and end of each year. Financial statements show the strength or weakness of a company, and the success of their operations during recent or historical periods. There are three different financial reports: balance sheet, income statement and cash flow statement.
- Balance Sheet is a snapshot of the company’s financial position at a single point in time. It shows the assets, liabilities and equity of your company.
- Income Statement displays the income, expenses and profit over a period of time.
- Cash Flow Statement shows the cash that is being generated by the business and how the business is using the cash.
In the death care industry, sales can fluctuate from year to year. So, by only looking at two years the information may be a little misleading. By comparing expenses from year to year, you can uncover areas in your business where costs are increasing. The income statement can tell management how well they are controlling their costs and compare that to the revenue they are bringing in.
Your financial statements are telling the story of your business. They can show you where the business is succeeding and failing. Are you taking the time to read the financial statements and fully understanding the facts that they are telling you?
This article originally appeared in Trigard Tuesdays, our weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/tuesdays.