Tips for Developing Your Small Business Financial Report

By Haliyma Barrow

Small business financial reports are very important when you are looking for funds from a lender for the purposes of expanding your business operation. These reports should include the following:

A balance sheet – This is one of the most important statements in any small business financial report. It shows a list of the assets and liabilities of your business and financiers will get their first impression about your business from the balance sheet. When preparing this statement, you should clearly place current liabilities and assets from long term liabilities and assets. The equity should reflect the appropriate model for your business such as sole proprietorship, limited liability, partnership or corporation.

A profit and loss statement – This is another important component of your small business financial records. It shows the profitability of your business for a period of time not exceeding a year. It is advisable to preset this statement in comparison to a similar period in the previous year, so that the financier can gauge the performance of your business during the same period and gauge whether your business is improving or not.

Another component of a small business fiscal report is the statement of cash flows. The amount of information that you want to disclose in this report is at your discretion. For your prospective financier to get a clearer picture it is advisable to provide as much detail as possible. This should however be weighed against the cost of preparing such a detailed report especially if you are hiring an accounting consultant to do this for you.

You must show your financier how you came up with your financial report by including notes in your financial statements section. This clearly outlines the accounting procedures that were followed when you prepared your financial records. These will guide your financier on whether enough detail was included in the preparation of the reports or whether they should ask you for more details.

Depending on the way your books are kept, some of these components can be omitted altogether. If you are presenting an interim small company financial report, then the statement of cash flow can be left out.

It is important that you include any supporting documents for your small business financial statement. Documents showing the profitability of your business by product will help the financier get a better picture of which products are making the most income for you. You should also find out how the financier calculates their financial ratios, so that you know which item you can combine without giving up substantial financial details. This is important if your financier is going to look at the net worth or working capital of your small business in order to approve your application.

When preparing your small business financial report for the purposes of financing, it would be a good idea to keep your records in good order. Some financiers will ask an independent certified public accounting firm to go through your financials and corroborate your statements. Small business financial records are important to the growth of any small business and you should give this the appropriate time and consideration.

Author Information

Haliyma Barrow worked for a student newspaper as a staff reporter at Indiana University of Pennsylvania. Since then Haliyma has contributed a variety of informative articles about business finances such as benefits of annuities on taxes.

Midyear Checkup: Are You Thriving or Just Surviving?

Taking stock of your freelancing business.

If you are reading this article on the date that I published it, we are exactly at the half-way point of the year. Yes, I killed the “evergreen writing” component once I wrote the title, but what I am going to say here can be applied any time of the year.

As freelancers we should take stock of “how are you doing?” at various points of the year. If you do not, then you risk missing the mark and whatever goals you set for yourself at the beginning of the year, perhaps even when you set out to freelance in the first place.

Freelancing Life

One thing about a personal review is that you can make adjustments to help you get back on track. To that end I have pulled out some of the concerns we self-employed workers have, identifying those areas and how you and I can make improvements. Oh, yeah, I am not about to harp on the “tough economy” angle either—if you are still in business for yourself, you already understand that challenge.

Time Management – Are you making good use of your time? Easily, we can become distracted by the Internet as we do our work. There are freelancer forums, blogs, social media and networking sites and email to woo us away from what we do. Be honest with yourself: are you spending too much time socializing and not enough time writing for pay?

Equipment Upgrade – I finally tossed my Windows-based personal laptop and bought a Mac. Yes, I am now a Mac snob. Seriously, I made the decision to switch when it became evident that registry errors and the usual PC slowness was a major drag on what I do. No more anti-virus and crapware to deal with. I spent more time in the past month writing for pay and less time trying to coax broken Microsoft Windows to work.

Pay Scales – I have been working with a few clients for several years and still charge them the same rate. That is good for them, but not for me as my own costs have increased since then. Are your freelancing rates frozen? Is it time for you to begin raising them? You should be able to pass along a modest five-percent increase without a problem, but if you are aiming for ten percent or more, then be prepared to explain why. Perhaps there is an added benefit such as tweeting and stumbling published work that needs to be mentioned.

New Vistas – I am not going to say that print magazines are dead, but if you are spending an extraordinary amount of time sending out queries with very little to show for it, then it may be time for you to explore other options. I get more queries from potential clients than those I send out, which allows me to cherry-pick the ones I want. Still, if things are a bit slow I will swallow my pride and take on a gig just to keep my writing flow going and my income stream flowing. I still write for two print publications, but the lion’s share of my income is derived from on-line work.

Tax Management – Yes, I am still doing my own taxes. I cannot see that changing unless my tax picture suddenly becomes very complicated. I do not think that it will, but I am not taking any chances. I know when my quarterly federal taxes, corporate state filing and local privilege licenses are due or up for renewal, I can tap a separate bank account I fund for those payments. No more panicking in advance of a tax deadline to pull together monies owed.

Long Term – Funding for my personal retirement has taken a back seat to everything else in recent years, but that is about to change. I will still put money in my children’s education accounts and set aside other cash and finally get serious about a period in my life when work will not be the priority it is today. Honestly, I do not believe I will ever retire—I love to write—but, my flesh and bones may not be so cooperative in my latter years. Plus, it would be nice not to be so deadline-focused, writing just enough to make some money, but without the ever-present calendar with important dates circled in red in front of me.

Your Passion

Six months from now I will be taking a look at a year completed and laying the groundwork for the year to come. One point I did not mention is your personal passion for what you do. If it is gone, can you get it back? If not, might it be time for you to move on?