Business Consulting

Consulting for Small Businesses: The Power of Financial Statements

Apr 27, 2023

At 4Corner Business Services, we provide our clients with consulting services for their Denver, CO businesses, both large and small. Our team of accounting experts use large and small business consulting to help owners make critical decisions as their organizations grow. This includes offering payroll help, support in choosing & using accounting software, professional tax services, and business financial consulting.

Our consulting services provide large and small business owners with invaluable insight into financial statements. 4Corner’s financial statement analysis allows owners to better understand large and small business cash flow management, help owners make executive decisions, and assists owners in managing the bookkeeping for small businesses and large ones.

That being said, this article was written with small business owners in mind. We’ve peeled back the curtain on financial consulting services we provide for small businesses. From understanding what is a financial statement to financial statement analysis, we’ve compiled a guide for owners to be proficient in small business cash flow management.

What is a Financial Statement?

A financial statement provides small businesses with a formal record of an organization’s financial activity. These reports both give insight into a business’s current financial status and an idea of how well it may perform in the future. Not only that, but financial statements are required for audits and are often used for taxes, future financing, or investing.

Financial statements are broken down into several main items: a current balance sheet, a profit and loss statement, weekly revenue reporting, budget vs. actual statement, and a cash flow statement. Together, these reports provide small business owners and key stakeholders with an understanding of revenue and profits. They also serve as a basis on which to make predictions about the company’s financial future.

Why Financial Statements Are Powerful

The balance sheet shows assets and liabilities. The income statement records company revenues and expenses within a particular period, which is essential in bookkeeping for small businesses. The cash flow statement demonstrates how much cash a company has on hand and its ability to conquer small business cash flow management. 

Financial statements demonstrate a small business’s ability to meet current liabilities, pay operating expenses, and fund future investments. They're essential for helping small businesses set goals, as these financial statements include all of a small business’s operational results, its current financial position, and its current cash flow. They create a trail that documents a company’s financial activities; they summarize important financial accounting information about the company; and they give both internal and external stakeholders an accurate picture of the organization’s current financial situation. 

Individually, the financial statements for small businesses each serve a different purpose. When combined through small business consulting, they provide an invaluable look into the current function and future outlook of the small business.

What Kinds of Financial Statements Do Small Businesses Use?

We’ve answered questions like “what is a financial statement?” and “why are financial statements important?” Now let’s uncover some of the top financial statements consultants like 4Corner Business Services use in small business consulting.

Income (Profit and Loss) Statement

The income statement, also called the profit and loss (P&L) statement, tells you the profitability of your business over a period of time. The statement takes into account total revenues and expenses over a given period to give an overview of your small business’s financial performance.

P&L statements demonstrate how your company's finances perform over a time period. They track information such as expenses, revenue, gains, and losses. In this statement you’ll understand both gross and net profits for your small business.

Cash Flow Statement

A cash flow statement tells you how cash is leaving and coming into your business. Alongside the income statement and balance sheet, it is one of the most important financial reports for small businesses.

Small business cash flow management starts with the cash flow statement. This statement shows you how your company makes and spends money, along with how it runs. This statement is usually over a full fiscal year, and it works for future opportunities by showing when your business tends to be high or low on cash. This makes it easier as an owner to plan for growth and avoid risk.

Balance Sheets

The final of the most crucial small business financial reports is the balance sheet, which tells you your business’s current assets, liabilities, and shareholder equity at a certain time. In other words, it tells you what your business owes and owns. 

A balance sheet also shows prospective shareholders your company's net worth by illustrating its financial position. It contains three accounts that come from the general ledger: assets, liabilities, and equity. The balance sheet is a must for accurate financial statement analysis during bookkeeping for small businesses.

Accounts Payable Aging Report

Accounts payable (AP) aging reports illustrate the money that you owe to vendors or suppliers. In summation, the AP aging report tells you which amounts you to which vendors within a given time frame. Though, this report typically accounts for thirty-day periods.

Knowing how much they have to pay gives small business owners the knowledge to ensure they have enough cash on hand to pay their vendors. It’s often used by consultants in small business consulting to cut any extraneous costs and tighten existing processes.

Accounts Receivable Aging Report

On the other hand, the accounts receivable (AR) aging report tells you how much money your clients owe your business, and in which month you expect to receive payment. Small business owners often check in on this report monthly. Doing so enables you to predict cash flow and plan your business operations and expenditures accordingly.

Bookkeeping for small businesses must have handy the information contained within the AR aging report. It makes way for better small business cash flow management by allowing small business owners to collect money faster and avoid cash flow problems down the line.

Cost of Goods Sold Report

The cost of goods sold report contains the expenses directly related to the sales you’ve made. For example, suppose you’re a small business that sells specialty silks. The cost of goods sold is the cost of the silks you sell within a financial year. Keep in mind this is the cost of goods sold, not the cost of all goods purchased.

Budget vs. Actual Report

The budget vs. actual report compares your expected costs and revenues to what you actually paid and earned. This is often compiled for a month, and can take into account unexpected costs that often creep up as you operate your small business. The budget vs. actual report can also identify trends over time, so you can understand the difference in expected vs. actual numbers, which can help you better anticipate ebbs and flows in business and customers.

Weekly Revenue Report

A weekly sales report gives you a deeper understanding of your business’s performance in different sales activities over the last week. Your sales report should track and display important sales metrics, most importantly your sales key performance indicators (KPIs). These differ by each small business, but are identified as the most important metrics you track that relate to your organization's overall performance. 

4Corner Small Business Financial Consulting Services in Denver, CO

We know that accounting for construction companies is always going to be more complex and unique than other industries. That’s why 4Corner Business Service's team of experienced accounting and small business consulting experts provide you with the tools and financial information you need to make critical business decisions as a small business owner. 

Allow us to be the experts on bookkeeping for small businesses for your Denver, CO company. We help businesses both large and small implement proven growth strategies so you can turn our small business consulting services into revenue successes. 

We’ll take the guesswork out of small business cash flow management and accounting so you can tackle more projects. If you have any additional questions, feel free to contact us at 4Corner Business Services. You can set up a meeting with Phil Zavala, founder of 4Corner, to get you on the right track.  


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