Essential Financial Documents Business Owners Should Have
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Essential Financial Documents Business Owners Should Have

As unexciting as it is, one of the most important responsibilities you will have as a business owner is to be on top of your financials and paperwork. Whether you are preparing for tax season, a meeting with your accountant, or applying for business financing, it is best practice to have a few important documents ready at all times. Whether your business is a publicly traded, multi-million dollar corporation or a mom & pop shop, it never hurts to be prepared. Let’s take a closer look at what these essential documents are.

Profit & Loss Statement (P&L)

Also known as an income statement, a profit and loss statement tracks your business’ net profit by subtracting operating expenses from your business’ gross profit. You will be able to show lenders and investors how much revenue your business generates, overhead costs, and how much money your business is projected to make in the future.

Balance Sheet

A balance sheet is a look at the current state of your business’ finances. It tracks your business’ assets, shareholder’s equity and liabilities. Current assets will include cash and holdings that can be converted to cash such as inventory, accounts receivables, and more. Fixed assets include property, equipment, furniture and other items your business does not plan to sell. Shareholders equity includes invested capital and retained earnings by owners and shareholders. Liabilities include items such as accounts payable, taxes, bank loans. Overall, a balance sheet is a snapshot of your business’ financial standing at the current time. The Small Business Administration does a great job of breaking it down; “As an equation, it looks like liabilities + owner’s equity = assets. The two sides of the equation must balance out.”

Cash Flow Statement

As stated on, “a cash flow statement is one of the quarterly reports that any publicly traded company is required to disclose to the SEC and the public.” Although your business may not be a publicly traded company, it’s not a bad idea to have a cash flow statement. This financial document shows how much revenue is coming into your business, along with how much is going out to cover any costs. Similar to a P&L statement, a cash flow statement will provide insight into your business’ future and can be taken into consideration when it comes to obtaining financing or investments.

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