As a business owner facing down the end of another financial year, you’re likely paying more attention to those all-important profit and loss margins. Particularly if your financials are showing you’ve made a healthy profit as that will directly impact the amount of tax due, but we often here from clients, “but where did my profit go?” The answer can be found in your balance sheet as it shows the distinct correlation between your profits and losses.
Profit and Loss
Think of your balance sheet as the “big picture overview”. While your profit and loss margins give an indication of how your business has performed over the past year, your balance sheet clearly outlines where those profits have gone. Further clarification can be obtained by comparing the figures from last year’s balance sheet with the figures from the current year. The difference between the two sets of figures will help you pinpoint where your profit is hiding.
Granted, entrepreneurs and small business owners excel at generating great ideas and novel concepts. But while you may be passionate about your business, without a degree in accounting you may not be operating with a full understanding of your financial position. This can lead to poor financial decisions that can set your back or cost you the business in the long run.
This is where a business plan or our financial awareness course can be invaluable in helping you better understand your businesses finances and equip you to make sound strategic decisions.
In the market for practical advice that’ll improve your financial literacy? We have courses starting soon, contact SMART Business Solutions – we empower you to make better business decisions that’ll ensure long-term success.
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