How important is your business Balance Sheet? It is the difference between failure and success. By understanding a Comparative Balance Sheet, you can use the information as a Gauge of Success.
To drive an automobile safely, we use the dashboard gauges to monitor the vehicle health, speed, and rate of progress. The same is true of a Balance Sheet. It gives accurate measurements of a Company — at any point in time.
Until recently, a Business Owner would submit financial records to an accountant and, then, wait… Sometimes, for months, before receiving a set of Financial Statements — the gauge of success.
A traditional set of financial statements includes a Balance Sheet and an Income Statement. What good is a Balance Sheet at a “point in time” — when that point is long past and in the rear-view mirror? Not much!
And, to add insult to injury, typically the Financial Statements were mailed to the Business Owner without explanation. The CPA was quite pleased with the effort to generate fancy presentations. There was no value to the Client.
What is the value of monitoring a Company moment-to-moment, in real-time with the guidance of a Virtual CFO? Priceless!
Similar to the benefit of dashboard gauges as we drive, an understanding of a Comparative Balance Sheet can be a matter of life and death — of your Company.
The information gathered from a glance of your eyes will be: Specific, Measurable, Attainable, Relevant, and Time-Based. Not long time Past, but a forward-looking “windshield” view of the Future resulting in Success.
Basic Accounting Equation
The basic accounting equation is Assets = Liabilities + Equity. Or, to frame the same information in a more meaningful way for the Business Owner: Assets – Liabilities = Equity.
Equity is simply what YOU have built. When starting a Company, you will fund the initial Checking Account with dollars from your previous efforts. YOU invested blood, sweat, and tears to obtain those funds — or Equity.
From that beginning Equity amount, you can gauge the health of your Company in this way: if Equity increases, all is well; if Equity decreases, your skin-in-the-game is at risk.
The Big Lie
For several decades, the American people have been sold a deceitful and defective Bill of Goods — that Equity can be built with Debt. It cannot. Yes, leverage is one thing. Unadulterated debt is something else.
And, more debt will not a debt problem resolve. Period. Look again at the example of a Balance Sheet. An increase in Liabilities might increase Assets. Yet, generally, an increase in Liabilities will result in additional spending.
As costs go up, odds increase that Net Income will go down.
Here’s the Secret: Net Income (Loss) is what makes a Balance Sheet balance.
The mysteries of accounting have been revealed. Now, you know. If YOU want Equity to go UP, the only way to accomplish that from operations is to make Net Income go UP — which is the last Equity line on a Balance Sheet.
You have the opportunity many will never experience. Even, when presented with the Better Business Plan, many ignore its benefits.
- Vision to destination of your Choice
- Map for safe navigation of your Route
- Benchmarks to measure your Progress
Can you imagine these results?
- Maximize Time and Money
- Minimize Stress and Taxes
- Eliminate Worry and Debt
Yes, you can totally eliminate the burden of debt. We have all felt the weight of being slaves to a Banker.
If YOU want freedom, give me a CALL, today!