So when starting a business or even running a business regularly I get asked a lot what’s the point of financial statements to my business and how are they going to help me I get them all the time I don’t know what to do with them and I don’t know what it means and I spend a lot of time really teaching people how to read financial statements for their business and what they can do for them do for them even if they’re just a small business and for one it’s gonna get think of it like a scorecard it’s going to tell you the overall health of the business you can see a snapshot of all your income to date or over a month or over a period and then you could see what your expenses are and your net income looks like so that give you an idea of like okay I’ve been running this for a while is this even profitable should I keep doing it so that’s gonna tell you like the overall health of the business secondly obviously it’s going to measure is your profit so you may be taking in some income and spending a lot of money but it’s important to know that financial statements aren’t like checkbook registers just because you spent it doesn’t mean it’s a tax-deductible expense or that it’s an expensive item sometimes when you buy capital assets for example a truck for your pest control business that’s not I deduct thirty thousand dollars for that truck right then and there it goes on the balance sheet so you have two things playing against each other that really help you determine what your profitability is going to be and that has an obviously an impact on taxes at the end of the year three management’s health I always tell people are running a business if they’re not looking at numbers I don’t know how they manage your business because that’s telling them you know is the is it productive for me to add another truck to my pest control business because if it’s not if the profit margins aren’t there and you haven’t established that then you shouldn’t be making gut decisions like that that actual business trends are going to tell you when you need to do that so using that’s really should be really important to manage managing the business itself it’s also going to show you trends so if you have a business that it could be a restaurant or some other type of seasonal business you can actually look at okay what’s my first quarter look like to my second quarter or compare the first half of the year this year to the first half of the year last year and look for trends are you growing are you declining are you spending more spending less so really evaluating those trends and ratios really give you a lot of information on where your business is going in the future and obviously the last one a lot of people like it shows if your business is got value is it worth anything someday you’re gonna want out you might want to sell you might want to get rid of the business and you don’t need to just close your doors and walk away there’s usually something of value there that might be worth something to someone else to purchase so these financial statements are going to be really important in that process as well and determining value and ensuring that you can actually sell the business.

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