Preparing Basic Financial Statements

Download a template and do it yourself or outsource the work online

Creating financial statements for your company is a critical task that will help you know if your company is growing, shrinking or staying flat. They are necessary for obtaining bank loans, selling your business or finding investors. In addition, analysis of the numbers can also help you grow your revenue by highlighting areas for improvement.

There are three basic financial statements:

1. Income statement (also known as P&L or profit and loss):shows whether your company is profitable, expressed by "Revenue – Expenses = Profit".
2. Balance sheet:a snapshot of the company's assets (property, inventory, cash) versus its liabilities (loans, accounts payable, debt), expressed by "Assets = Liabilities + Shareholders' Equity".
3. Cash flow statement: shows where the company's cash is going (to operating activities, investment activities, or financing activities) expressed by "Beginning Cash Balance + Cash Inflows – Cash Outflows = Ending Cash Balance".

 

Purchase an off-the-shelf, small business accounting system

There are several software programs designed for small business accounting that run from $50 to $3000 and can do everything from payroll to inventory to printing checks. These programs will create the financial statements for you automatically based on your entries.
Try: Quickbooks is probably the most well-known system on the market. They offer different versions including a Web option that lets you manage your finances online. Other options include Simply Accounting and Peachtree Accounting.

Do it yourself with templates from the Web for under $50

For just the basic forms, several Web companies offer inexpensive templates to download that are an easy way to get started creating your financial statements while staying on a budget.
Try: If you're comfortable tracking your numbers in a spreadsheet and don't need sophisticated features, check out the templates available from Urgent Business Forms (balance sheet and income statement only) or Ozgrid (more features, including calculating financial ratios).

Hire a bookkeeping or accounting firm

For companies that have complex financial needs or do not have the resources to do it in-house, an outsourced bookkeeper or accountant may be the best solution.Pricing is based on transaction volume and can be cheaper than hiring a bookkeeper on staff.
Try: TADAccounting offers a full range of services including payroll, inventory, taxes, as well overall financial reporting. Another option is Balance Your Books, which offers bookkeeping services over the Internet.

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