A lot of business owners don’t like numbers. Some are downright scared of them.
This is the wrong attitude, says smallbusiness strategist and Xero certified advisor Danetha Doe. “You should embrace numbers. They’re your best friend,” she says. “They tell you a story so you can make decisions—whether you can hire a new employee, expand to another location or take that vacation to Italy.”
Numbers have taken Danetha a long way, from NFL cheerleader to CEO of Danetha Doe Consultingand one of CPA Practice Advisor’s Top 40 Under 40 accounting professionals in 2015. Danetha advises other business owners to depend on the following five financial reports. They’re essential if you want to hear the story your own business is telling you.
The balance sheet
Your balance sheet indicates your financial position. It indicates your liabilities and assets. Your liabilities could be loans or other forms of debt. You need to keep track of them. You will also need this information when you apply for funding or when you need to show documentation to support your net worth as it relates to your business.
Your business also has assets, no matter how small it is. If you’re running a business online, your assets may consist of a laptop. If you have a product-based business, your assets may include a warehouse full of inventory. Your assets can also be intangible, intellectual property like trademarks and patented processes.
“Your balance sheet tells you how much your business is worth at any given time. You should review it at least once a year, because it’s very important to have an idea of your company’s worth for tax-filing purposes,” says Danetha.