• HOME
  • SOLUTIONS
  • TEAM
  • CLIENTS
  • CONTACT
  • |
  • WORK
  • LIBRARY

Share This Story, Choose Your Platform!

Why Financial Statements Are Important?

Why Financial Statements Are Important?

Financial management is critical to the ongoing health and vitality of a business. Financial statements are the vital life signs that tell how the business is doing.

It is important for every entrepreneur to take the time to understand the financial measures of his or her business.

 

The Purpose of Financial Statements

Financial statements include the various forms of income the business generates and the expenses associated with operating the business.

A business can take many forms. It can be a proprietorship, a partnership, a corporation or an individual. The financial statements tell the reader where the business stands financially and how it got there.

Financial statements enable a variety of people to assess the business’s financial health, the value of the business and its future prospects. These people include shareholders, investors, a bank who uses them to assess the ability to secure and repay a loan and the income tax department.

However, the primary user of the financial statements is the entrepreneur or business owner. Financial statements are a report card that measures what you are doing right and where you need to make improvements. Without them, you are flying blind.

Summary

Financial statements complete the Feedback Loop for the entrepreneur. Ideally, the entrepreneur prepares a financial projection of anticipated income, expenses and profitability. At The Covenant Group, we work with our clients to prepare One & Five Year Income and Expense Pro-formas. The pro-forma statements give a financial picture of the business goals and allows for “what if” scenarios to describe how the business will get there.

The pro-formas become your financial navigation system that ensures you are not flying blind into the future. The financial statements tell you whether you are on course to achieve your goals, and if you are off course, by how much.

The financial statements provide a summary of how you have done so far and form the basis on which you can adjust your flight plan. As a result, you can better manage the ongoing health and vitality of your business.

 

By Norm Trainor | August 04, 2021 | Business Management, Financial Management

Categories

  • Business Management
  • Strategic Planning
  • Entrepreneurship
  • Resource Management
  • Client Relationship Management
  • Brand Management
  • Practice Development
  • Effective Sales Strategy
  • Corporate Social Responsibility
  • Sales
  • Systems and Processes
  • Strategy
  • Structure
  • Financial Management
  • Family Enterprise
  • Focus
  • Networking
  • Philanthropy
  • Innovation
  • Marketing
  • Engaging Your Clients
  • Community Engagement
  • Client Engagement
  • Client Experience
  • Driving Results
  • Digital Leadership
  • Mastering the Sales Conversation
  • Leadership
  • Conversational Selling

View our Archives

service excellence leverage technology social media marketing financial services building your brand employee engagement business builder mindset Best Practices of Salespeople client experience The Entrepreneurial Journey

Related Posts...

The Blind Spot that Could End It All for Your Business

The Blind Spot that Could End It All for Your Business

Often in our drive to generate revenue, we also increase expenses. This can sometimes mean that the profitability of our business is decreasing.
Read More
How Testing Assumptions Can Improve Performance?

How Testing Assumptions Can Improve Performance?

All businesses are built on a set of assumptions. The longer the business is in the market the more these assumptions are tested. Many entrepreneurs struggle to articulate the underlying assumption of their businesses.
Read More
Why Coach On The Go™

Why Coach On The Go™

We have built a best in class mobile platform to engage users daily in implementing best practices and tracking activities and results to build their business.
Read More
Get updates on new publications, tools, and other resources from The Covenant Group.
What we do
  • Strategy
  • Work
  • Solutions
About us
  • Our Story
  • Learning Library
  • Contact
Social
  • LinkedIn
  • Twitter
  • Facebook
  • YouTube
  • Instagram
© 2022 The Covenant Group Ltd. All Rights Reserved.