Getting ready for a business and working on a great business plan isn’t complete without an accurately made financial statement. It is indeed a key part of the plan. According to Alfred Szydelko, “the essence of financial statements has been used as a background to present the elements of performance management, providing the required characteristics of balance, profit and loss account, and the business activity report as a supplementary statement of the financial statement of selected entities.”
In this article, you’ll learn guides and other examples of financial statements for business plans and startup. Read on for more details.
What Is Financial Statement?
Keeping track of your business’s finances is critical to its success, from setting a beginning budget to finances for a growing company. A financial statement is a legal document that documents a company’s financial operations.
These plans depict the present state of your business and anticipate the company’s future vision and ambitions. Beginning with your day-to-day bookkeeping, you may create financial statements for your small business.
To put together your financial statements, you’ll extract and arrange data from these documents. Financial statements are an important element of a company strategy since they may help you attract investors or get bank loans.
Why Is It Important?
Financial statements are crucial since they provide vital info about a company’s financial health. Financial statements assist businesses in thinking critically by highlighting which parts of the business give the highest return on investment. It’s also crucial for businesses to file financial statements yearly.
As per Reza Malekinejad (2016), “Existence of the financial information of transparent and comparable is one of the main pillars of accountability executives and the basic needs of decision-makers of economic.”
What Are the Things You Need to Create an Effective Financial Statement?
To come up with an accurate financial statement, you may need several types of documents, depending on the requirement of your tech expert. However, most of the things that many businessmen uses include (1) startup budget or cash flow statement, (2) cost worksheet, (3) projected profit and loss statement, and (4) projected balance sheet.
Now, let’s explore more about these types of statements and how each works for business. Read on.
1. Business Budget
A startup budget is similar to a predicted cash flow statement, but with a bit more wiggle room. Your lender wants to know your budget, or how much money you plan to get in each month and how much money you intend to spend. Lenders want to know that you can stick to a budget and won’t go beyond.
They also want to know how much money you’ll need to pay your bills while your company is getting off the ground and how long it will take you to break even on your cash flow. A standard budget spreadsheet should be kept for three years so that your lender can understand how you plan to pay back your monthly loan installments. Check out this sample for reference.
2. Cost Worksheet
An cost worksheet displays a period’s revenues, costs, and profit or loss. To begin, collect all sorts of earnings for the time period covered by the statement. Wholesale and retail sales, as well as rental revenue, are possible sources of income.
Then add up all of your expenditures, including supplies, payroll, advertising, utilities, equipment, and company property rent. Subtract your entire costs from your whole revenue to get your end result. See this sample of a cost worksheet.
3. Profit and Loss Statement
This financial statement, also known as a profit and loss statement, pro forma income statement, or P&L, is simply an explanation of how your firm generated a profit (or incurred a loss) during a period of time.
It’s a table that displays all of your income sources and all of your costs during a three-month period, with the overall net profit or loss listed at the bottom. This statement summarizes your company’s activity during a certain time period, such as a month, quarter, or year. Check out the sample of P&L statement.
To make this declaration, you must first identify all of your sources in order to calculate your gross revenue for that period. Then, for the same period, make a list of all costs.
4. Balance Sheet
Even if there isn’t much to cover, preparing a startup balance sheet is tough. The balance sheet displays the worth of the assets you bought for your business, how much you owe to creditors and other lenders, and any early investments you made. This spreadsheet’s start date is the day you start your business.
As per Asllanaj (2008), “balance sheet comes from the assumption that between the total assets on one side and the total of capital and liabilities on the other hand, there must be a balanced state. Consequently the total assets in the balance sheet must be equal to the total of liabilities and capital.” See this sample for more information.
Examples for Financial Statements
Conclusion
Financial statements give an overview of a company’s financial health, including information on its performance, transactions, and cash flow. These documents are crucial since they detail a company’s income, spending, profitability, and debt.
References:
- Alfred Szydelko (2016) THE ROLE OF FINANCIAL STATEMENT IN PERFORMANCE MANAGEMENT. Retrieved from https://www.researchgate.net/publication/323124745_THE_ROLE_OF_FINANCIAL_STATEMENT_IN_PERFORMANCE_MANAGEMENT
- Reza Malekinejad (2016) International Journal of Accounting Research (IJAR) Vol. 2, No. 11, 2016. THE EFFECTIVENESS OF FINANCIAL STATEMENTS IN MANAGEMENT DECISION MAKING. Retrieved from https://www.arabianjbmr.com/pdfs/AC_VOL_2_11/4.pdf
- Asllanaj (2008). Humanities and Social Science Research; Vol. 2, No. 2; 2019. Analysis of Financial Statements: The Importance of Financial Indicators in Enterprise. Retrieved from https://www.researchgate.net/publication/333880039_Analysis_of_Financial_Statements
