Financial statements are an essential part of running a business and they give the business owner an idea of the assets and liabilities of the business as well as detailed accounts of cash inflow and outflow. While a larger company may need a dedicated team to prepare various financial statements and make sure that reports are submitted on time, a small business may not need an accountant to prepare their financial statements.
Small businesses are also required to prepare and submit certain documents, however, not to the extent of a large business. Due to this, the team operating the small business can prepare the financial statements themselves, although many find accounts and statement preparations a daunting task.
Due to this reason, a small business can opt for outsourced financial management services or hire an accountant in Ilford for bookkeeping and other financial reporting functions. While a small business has the option of preparing their financial statements themselves or outsourcing to company secretarial services UK, there are three main financial statements a small business needs.
Balance sheet
One of the financial statements a small business needs is a balance sheet. A balance sheet shows the financial position or assets of a company on a specified date. This is calculated by adding the liabilities of the small business with the shareholders’ equity.
A basic overview of the balance sheet is that the assets are listed on the left and are things owned by the small business that can be converted into cash or already has been. On the right are liabilities and shareholders’ equity. Liabilities are also known as debts and are the amounts the small business owes others. Shareholders’ equity is what would remain if a business sold all its assets and paid all its liabilities.
While the balance sheet is a straightforward financial statement, a small business owner can make use of company secretarial services to ensure their balance sheets are prepared on time and accurately. However, if the small business has an accountant or someone with a background in accounting, the balance sheet can be prepared without the involvement of a third party.
Income statement
An income statement is a financial statement that shows how much revenue a company made during a specified period, which is known as the net income of the business. When preparing the income statement, an accountant in Ilford will add revenues and gains. They will separately add expenses and losses. Then the expenses and losses are subtracted from the revenues and gains.
An income statement is also known as a profit and loss statement and company secretarial services can put together the income statement for a small business.
Cash flow statement
Companies have to record their inflows and outflows of cash and this report is called a cash flow statement. This is one of the financial statements a small business has to prepare and outsourced financial management services include cash flow statement preparations for various businesses.
A cash flow statement will give a small business an idea of if they generated or lost cash during a particular period. Company secretarial services UK will look at various components in order to put together a cash flow statement.
Operating activities include cash inflows like the sale of property and cash outflows like employee salary payments. These are the normal and core activities of the business. Investing activities are changes in cash from the purchase or sale of property. Financing activities are cash level changes from purchases and payments.
These activities are taken into consideration when preparing a cash flow statement and small businesses are required to submit these financial reports. If you are a small business owner and you don’t have the capacity to prepare your own cash flow statements, you can opt for company secretarial services that will take care of your financial reporting for you.
Balance sheets, income statements, and cash flow statements are the three main financial statements a small business needs to prepare and outsourced financial management services can prepare these financial statements for a small business in a cost-effective way.