When your business is small, you should focus 100% on your cash flow. However, when you start to grow and cash isn’t as tight, it’s really important to get to know your balance sheet.
For those who don’t know, a balance sheet is a report (usually generated by your accounting software or accountant) that shows the current value of your business.
You’re building something valuable
Why is it so important to regularly review your balance sheet?
It’s simple: you want your business to be worth as much as possible. The amazing thing about running your own company is that not only are you paying yourself a salary that you’re (hopefully) happy with, you’re creating something that you can sell for quite a bit of money some day!
You should be actively monitoring the value of your company (your balance sheet) and be aware how much it’s worth. Has it gone up in value over the past quarter? Down in value? Why?
Knowing exactly what’s going on is vital to keeping your business growing and valuable.
Give me the nitty gritty
So how do we do it at Carson Systems? Well, we use QuickBooks. This is unfortunate, as its reporting capabilities are very poor. It’s great for viewing Accounts Receivable/Payable and other cash flow related issues, but it really sucks when it comes to viewing a valid Profit & Loss Statement (P&L), or the Balance Sheet.
So what we do is have our accountant prepare a monthly report with both our P&L and our Balance Sheet. We have him compare the current month to the last month and also the current month with the same month the previous year. This gives us a good idea how we’re preforming.
How do you do it?
If you’re a business whiz, please share your tips in monitoring and keeping your Balance Sheet healthy!