Curated by Carsonified

Topics

Learn with Treehouse

Accessibility, CSS3, Design, Django, HTML & CSS, HTML5, JavaScript, jQuery, NoSQL, PHP, Responsive Web Design, Ruby, Ruby on Rails, Tools, UX, Version Control, WordPress, iOS and more

Article 15

Small Biz 101: Know your balance sheet

By

07 January 2007 | Category: Business

When your business is small, you should focus 100% on your cash flow. However, when you start to grow and cash isn’t as tight, it’s really important to get to know your balance sheet.

bal.png

For those who don’t know, a balance sheet is a report (usually generated by your accounting software or accountant) that shows the current value of your business.

You’re building something valuable

Why is it so important to regularly review your balance sheet?

It’s simple: you want your business to be worth as much as possible. The amazing thing about running your own company is that not only are you paying yourself a salary that you’re (hopefully) happy with, you’re creating something that you can sell for quite a bit of money some day!

You should be actively monitoring the value of your company (your balance sheet) and be aware how much it’s worth. Has it gone up in value over the past quarter? Down in value? Why?

Knowing exactly what’s going on is vital to keeping your business growing and valuable.

Give me the nitty gritty

So how do we do it at Carson Systems? Well, we use QuickBooks. This is unfortunate, as its reporting capabilities are very poor. It’s great for viewing Accounts Receivable/Payable and other cash flow related issues, but it really sucks when it comes to viewing a valid Profit & Loss Statement (P&L), or the Balance Sheet.

So what we do is have our accountant prepare a monthly report with both our P&L and our Balance Sheet. We have him compare the current month to the last month and also the current month with the same month the previous year. This gives us a good idea how we’re preforming.

How do you do it?

If you’re a business whiz, please share your tips in monitoring and keeping your Balance Sheet healthy!

Follow @thinkvitamin on Twitter Please check out Treehouse

Other Posts You Might Find Interesting

  • Sorry - No Related Posts Found

Comments

  • http://www.studiolift.com Matt Carey

    Interesting that you use QuickBooks. Ever since we started our studio (4 years ago) we have been using Sage. Yes it only runs on a PC, but it is pretty much the industry standard for accountants and bookkeepers. It has great reporting, P&L etc, and we know that our bookkeeper just sends the sage file to our accountant at regular intervals and it will all tie-in perfectly.

    I used to have Sage running on virtual PC on my powerbook so I could read the Sage file that our bookkeeper sent us each month/quarter, but now with my MBP and Parallels Desktop it runs great

  • http://www.YouDesignIt.com Blake P.

    We work the same way because of Quickbooks’ inadequacies. Paying the extra amount for the accountant is worth every penny. Especially around tax time.

  • http://turnipspatch.com/ Jon Leighton

    I hate to be an annoying pedantic person, but someone has to do it, so I think you meant “You’re” rather than “Your” in the first subtitle.

  • http://www.petercooper.co.uk/ Peter Cooper

    I just read a book I bought from Amazon called “Finance for Non-financial Managers in a Week” which went into how to make and read balance sheets, P&L statements, and all sorts of other things. It’s really short and a quick, easy read.. so I’d recommend it to anyone else who wants to get up to speed with these things (or who just needs a refresher).

  • Ryan Carson

    Thanks Jon :)

  • Ryan Carson

    I just read a book I bought from Amazon called “Finance for Non-financial Managers in a Week”

    Great suggestion. That’s a good book. Another quality book is Analysing Companies

  • Ryan Carson

    I just read a book I bought from Amazon called “Finance for Non-financial Managers in a Week”

    Great suggestion. That’s a good book. Another quality book is Analysing Companies

  • Greg

    I’ve been using Quickbooks for a small RE biz and I’ve found that it is no good at keeping track of the ACTUAL value of assets as it is too focused on keeping track of the BOOK value of the assets.

    In an asset based buisness like RE, the distortion is very significant.

  • http://www.centernetworks.com Allen

    Ryan – as a former public accountant, I can share with you that the balance sheet(BS) is not the only measure of a company’s worth. In fact, usually the Income Statement(IS) and Statement of Cash Flows are much more important.

    Quickbooks is a good tool for a small business (I am thinking you might be bigger than QB can handle) but as a company grows, using a real accountant can always be good. Especially for tax time which I hear is even worse in the UK.

    The balance sheet shows you the balance of assets and liabilities you have accumulated for the specific period of time.

    But as you note, the combo of the BS and IS is the real key.

    Also – it is critical that one understands how a balance sheet works. As I worked with clients in my former life, I know that many times they are completely confused as to why an account like cash would be debited to increase value and not credited to increase value.

  • Ryan Carson

    Thanks Allen – I heartily agree!

  • http://www.adonislamar.com Adonis Lamar

    As a finance student, I completely agree with Allen. I haven’t had the opportunity to read the titles mentioned in the other comments, but I would strongly suggest that one read “The Portable MBA in Finance and Accounting.” It explains the significance of financial statements and their relationships to one another and the business as a whole. I have found it to be an excellent reference.

  • Ryan Carson

    The Portable MBA in Finance and Accounting

    Thanks for the tip Adonis. I’ll check that one out.

  • Mike Poskitt

    Probably a one-off visit, but I think Quickbooks is really easy to use for a non-accountant and easily exports to Excel for reports writing (I guess only good if you’re happy with Excel!). I reckon it knocks the spots off Sage (which I really don’t like!).

  • http://www.balancesheetwalk.com/financial-links.htm Carol

    Have to agree with Mike.

  • http://twitter.com/AboveFunction Above Function

    Brilliant, I’ve just started my own studio and I’m in very early stages…. but all this comes with my accounting app – FreeAgent. (www.freeagentcentral.com)

    It has some of the best reporting tools going and sure is a life saver to myself as a startup, it’s really cheap as well so no complaints.

    Great article Ryan I’ll make sure i monitor this on an ongoing basis.

Badges for Treehouse

Treehouse

Learn iOS, Rails, CSS3, jQuery, Node.js, HTML5, UX and more in less than 8 minutes per day. New videos added regularly. Sign up today and get a free Web Design Toolkit.

Ads Via The Deck

Think Vitamin Radio
Episode #34: Amazon Fire and Responsive Roundtable

Check out our bi-weekly radio show. Covering the hot topics on the web.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast as mp3

Advisory Board

The Think Vitamin Advisory Board in place make sure that you receive the best content possible.