A balance sheet is also known as a ‘statement of financial position’ because it provides a snapshot of your assets and liabilities – and therefore net worth – at a single point in time.
Regardless of terminology, many business owners neglect to review their balance sheet. This is a tragedy waiting to happen, as the coming market softening will make the balance sheet report more important than ever.
The purpose of a profit & loss report is fairly obvious to most, whereas the balance sheet remains a mystery for many business owners.
A balance sheet can tell you many things, including:
- Advance warning of cashflow problems
- Whether the business is solvent
- Working capital issues
- Whether you are funding your business correctly
- Inherent business risks and opportunities.
As a company director you are expected to understand your balance sheet, and failure to do so could have dire consequences, for both you and your business.
For example, if the business trades while technically insolvent, directors can be held personally liable for the company’s debts.
Don’t put yourself, or your business, unnecessarily at risk! Attend Q2’s next free event “Unlocking Balance Sheet Secrets” to learn how to read your balance sheet, and better protect yourself from business failure.