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Financial Statements
October 12, 2012

Financial Statements

Financial statements play a key role in identifying opportunities within a business.  Understanding how money is flowing in and out of an organization is one of the most basic concepts there is, however it is often overlooked by small business owners.  To illustrate this point I will use an example of a business I worked with recently.

 

This business worked events primarily in Arizona.  The company hired contractors in Arizona to handle operations at the events and would continually use the same group of individuals.  Once a year this company would hold an event outside of the state, and often would bring the group of contractors from Arizona to the other state to help support the operation.  3 years in a row the company would barely break even on their out of state events and couldn’t understand what was happening.  We stepped in and helped put together their books and their financial reports for them.  We were then able to generate statements showing where the funds were going.  We quickly were able to identify that the amount of extra money they were spending on bringing contractors from Arizona to other states was nearly 3 times the amount that they would spend if they found contractors in the state of the event.  This fairly simple discovery allowed the organization to realize that they needed to make contact with organizations in other states and hire local labor.  The next year the company saw record profits at their out of state event, simply because of the small discovery on their financial statement.

 

When running a business financial statements tell the story of how well you are doing.  If you don’t have adequate financial statements you may be running your business blind.  It may be time to consider hiring someone to help you get the statements cleaned up and professionally prepared.

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Author
Ryan Stone

Ryan Stone has been an Enrolled Agent (EA) for 3 years and has worked in the accounting industry for 5 years. He specializes in individual and small business taxes plus tax mitigation.

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