Need to quickly figure out if you’re making money or losing it?
If so, you need a balance sheet.
A balance sheet is a straightforward (but crucial!) financial document that balances your assets against your liabilities and equity. Luckily for the busy business owner, they’re pretty easy to create and read: one half of the sheet lists what your business owns while the other half lists how much you owe, along with how much of the company you or your shareholders own.
The information on a balance sheet gives you, your lenders, and your investors a quick overview of your business’s current financial health. In other words, when you need to take your business’s temperature, a balance sheet is your thermometer.
And along with a profit and loss statement (also called an income statement) and a cash flow statement, a balance sheet is one of your business’s most essential financial documents. You’ll be drawing up a lot of balance sheets, and if you want your business to stay in the black, you need to know how balance sheets work, how you read them, and how you can create your own.