Even if you are not the owner of a publicly traded company, it may still be in your interest to prepare and release financial statements including balance sheets. Preparing a balance sheet ensures that you have a full, accurate picture of your company’s’ finances at a given time. This can be extremely helpful to business owners who get caught up in the minutiae of day-to-day tasks and perhaps miss the bigger picture. Small business owners in particular often do not realize that their business is perhaps not as profitable overall as they expected, since they are dealing with small transactions on a day to day basis. Certain liabilities and depreciating assets, particularly real estate, may create an unhealthy financial situation for your business without you even realizing. Creating a balance sheet is a helpful step in creating accurate, comprehensive accounting records for your company.
Having an up to date balance sheet can help you recognize priorities within your business. A balance sheet will include any outstanding debts owed by or to you, and can remind you to focus on these or any other areas of worry that show up in the balance sheet report. Maintaining a cash flow and keeping debts under control are paramount when running a business. Balance sheets can help you adjust any business practices that aren’t serving your interests fully.
Aside from personal knowledge, creating a balance sheet can be beneficial if you decide to seek external investment in your company. Many banks, financial incubators and private investors want to see a complete overall picture of a company’s finances before putting their own money on the line. They use the information provided in a balance sheet to calculate financial ratios and determine whether your company is likely to be profitable, as well as whether or not you will be able to repay them. A balance sheet is a good way of providing this information, and has become the common standard request for investors.