Understanding Financial Reports

You need timely and accurate information to understand your organizations financial condition. This article explains how to understand financial reports such as a profit and loss statements and balance sheets.

  1. You need access to timely and accurate information.

    1. Before you can benefit from understanding your company’s financial reports, you must first have ready access to the reports from either your bookkeeper or CPA.  Also, you can create the reports yourself with “user friendly” software, i.e. “Quicken” or “Quickbooks”. 

    2. In addition, to be meaningful, the financial reports must be based on timely, accurate information.  Therefore, you need an “accounting system” or “bookkeeping” system” that tracks all of the company’s financial activities in an accurate and timely manner.

    3. Accurate financial information is also very beneficial to your bankers, creditors or potential buyers of your business.  Other business entities might not be willing to do business with you if you do not have reliable financial data to help verify your financial status.

    4. Monitoring your company’s financial performance, especially over a period of time where you can compare your results from year to year, will better enable you to:

      1. Quickly adapt to changes in market conditions.

      2. Identify opportunities or obstacles for growth before your competitors.

      3. Improve your company’s profitability and viability.