Financial Statements

Financial Statements: A Comprehensive Guide

The financial statements you produce for your company are the fundamental documentation that helps prospective investors or banking institutions to understand the stability and viability of your business when you are looking to attract investment.

These statements are also vital to communicating the profit or loss as well as the proper use of funding to shareholders and business partners. Having your financial statements in the correct format and style is crucial to allow others to be able to read these documents.

However, without having expensive auditors and accounting specialists in your employ or at least contracted to your company, it could be a significant challenge to produce these documents. The solution is Business-in-a-Box, our business templates have all the necessary financial documentation you need to produce proper financial statements and related documents for your business.

What are Financial Statements?

Your company uses its financial resources to perform the daily tasks of your sector of business, and the proper presentation of these results form a vital part of your corporation’s future planning. Without presenting proper audited financial statements your business might not be able to continue operating in the business marketplace. These statements are made up of various documents and the formatting of these documents must comply with the regulated statutes and standards of the accounting fraternity.

Regardless of which jurisdiction your business operates in, these accounting principles are mostly the same and they are used for the sourcing of funding and providing your shareholders with the reports and information that you have been doing a great job as officers of the corporation.

Financial statements are made up of several different financial documents such as:
  • Income Statement An income statement template is used to report the projected or past income of your company based on the performance during the period in question. These statements provide the income of your company under various headings set out by accounting standards. A well-managed company will have these statements for monthly, quarterly, and annual income.
    • Annual - during a fiscal year, your company will earn income and these figures are crucial to ensure the financial stability of your business. Annual income statements show your partners and financial institutions that you have a steady flow of income and where it is coming from.
    • Monthly/Quarterly – a monthly cash flow forecast shows the monthly performance of your company and are often used to project future growth and development. Especially over the period of a year, where the monthly figures will give an indication of your potential in your marketplace.
  • Profit and Loss Statement Using a profit and loss statement template, you can show the revenue of your company in relation to profit and loss. This allows you to show that your company is maintaining a sustainable profit margin or will show that your business requires funding or investment. The template will guide you through headings to input the correct financial figures for use by accountants and auditors.
  • Financial Projections Projecting your financial growth makes the funding and investment your company needs an achievable goal. By projecting your growth, you can show the need for funding or you can entice investors to fund your company to share in the profits. A 12 month financial projections template can provide you with annual projections or you can produce projections for 3 years running.
  • Balance Sheet The balance sheet of any company is one of the most important financial documents that you could present to any funder or institution. The balance sheet shows your income and expenses as well as the profit or loss that you have achieved. It also lists your assets, fixed and movable, as well as liabilities current and past. This balance sheet template gives a snapshot of the company from a financial perspective.
    • Annual - annual balance sheet gives a report of the past fiscal year and will show the depreciation of assets as well as liabilities that you have incurred over the 12 months.
    • Monthly/Quarterly - much the same as the annual balance sheet, the monthly and quarterly balance sheet breaks the liabilities and assets down for the period in question and shows the depreciation and increases in a format that gives an overall view of the company for the period in question.
  • Expense Statement Managing your company expenses is vital to making sure that your profit margins stay sustainable. However, in the day-to-day running of the business, you might incur extra cost for innocuous reasons, and they might go unreported. Expenses could be long or short term and they need to be kept in line with the market and performance of the company through the use of an expense statement template.
    • Annual - being able to view expenses over 12 months give potential investors a global view of the potential cost of investing in your company and can also show that you are diligent in keeping your costs down.
    • Monthly - the day-to-day running of your business needs careful planning and understanding of the expenses of your company. This template report will give your company and accounting officers the information to analyze the performance of your cost centers and allow for the management of the individual centers according to the rate of expenditure.
  • Cash flow Forecast Cashflow is the way you keep your company trading, and with this template you can produce a report that will show you how liquid your company is, meaning what cash reserves you have on a day-to-day basis.
    • Monthly - the Monthly Cash flow statement will give you the relation between the income and expenses of your business and how it impacts the available cash in your company. This will help you plan payments and future growth
    • Quarterly - in relation to planning and funding future growth, understanding the cash flow of your business over each quarter gives you the ability to understand when the best time of year to plan an expansion or sales drives would be.
Why do you need proper Financial Statements?

Running a business requires the combination of various moving parts like staff, product, and marketing initiatives but all these factors need a sustainable foundation based on financial stability. This means that your company needs strong financial grounding to grow and function in the business world. The only way to do this is by having proper financial statements with which to show banks and investors that you can apply their funding to make the company grow with their funding. This is also true for showing that your business is using the available funding in the correct manner, making sure that the money is going to the right initiatives and delivering on forecasting and projections.

The financial industry uses standardized reports and documentation to provide the financial standing of your business, Business-in-a-Box provides you with expertly designed templates that have been created by accounting specialists with the help of lawyers to make sure that when you use our templates you get the best financial statements for your business.

These documents provide the following information about your business:

  • Written Record - your financial statements are a written record of your financial performance over a period of time. They give the reader a snapshot of the financial control and stability of your business. Your properly formatted and audited financial statements are vital when seeking funding or investment from any institution.
  • Reports on every aspect of the Business - your financial statements will report on every aspect of the business, in terms of how much or little money is spent on it. When your business is struggling you will be able to see where the money is going by reviewing your financial statements. You will also see what product lines or departments are exceeding expectations when you view the financial reports from these departments or sales figures.
  • Future Growth - for larger corporations, the financial statements form an integral part of the annual reports that need to be submitted to shareholders and investors to show how well your company has been doing the past fiscal year. These reports will also enable you to secure financial backing or investment for future growth and expansion.
  • Provides Data to prevent Fraud - apart from reporting the state of your company financially, having proper financial statements allow you certain protective measures as well. When your financial statements are audited and confirmed by a registered auditor, you have shown that your policies and procedures make your company healthy and that you are able to manage the complexities of the current economic environment. With up to date financial statements that are correctly completed and formatted any skilled financial director or auditor will be able to identify potential problem areas that could lead to fraud or even closure of the company.
Financial Statements as Management Tools

The use of financial statements as a management tool is well known in the business arena, they provide the vital information that you need to make decisions on where to steer the company as director or CEO. There are 3 core financial statements that are used by executive management to guide a corporation is the right direction:

  • Balance Sheet As a snapshot of your business, the balance sheet is the most used of all the financial statements in our catalog of templates. The balance sheet shows the relationship between income and expenses, assets and liabilities, and shareholders’ investment or equity. The balance sheet provides the viewer with a clear understanding of the stability of the company and is also used to calculate various share and earnings ratios to indicate a positive investment opportunity.
  • Income Statement The income statement shows your company in terms of profit and loss over a given time. This template is designed with the company owner in mind, making it easy to view the revenue of the company and how it is being utilized. The income statement will give you the ability to plan for growth and show areas of concern during the period in question.
  • Cash Flow Forecast Understanding your cashflow is properly the most important aspect of running a business. Without knowing where your company’s money is going on a daily basis you will not be able to plan for debt or expenses. This financial template also helps you report on cash equivalents as well as cash so that you can plan correctly for the payment of monthly expenses like suppliers and salaries. The cash flow statement gives your management the ability to predict when the company will have cash on hand to pay for the day-to-day running of the business. It also shows how stable your company is to shareholders, a strong cash flow statement shows excellent management and profits.

Global statistics show that very few new businesses make it through the first 36 months of trading and often the reason for this is the incorrect financial management of the business. That does not mean that the business is not a good business, it is just that no proper financial principles were applied in the day-to-day management of the business.

Business-in-a-Box believes that all businesses should get the best opportunity to prosper and so we have created a database of business templates that will give you the ability to manage your business finances in the best possible manner. Our Financial Statement template catalog is designed by lawyers and accounting specialists and will give you the freedom and certainty to manage your company successfully. Sign up to get your financial statements and more than 1900 other business templates that will make the running of your business a dream.

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