Okay, truth be told I came across a really great article that really fits the topic of Connections before I could finish up my own full blog post. As I read it, I was saying in my head, “Yes! This! These are some great reasons to be looking at your Balance Sheet and making these Connections!” It embodies much of what I was wanting to say and does so quite nicely. I think it will be helpful for you to read.
I’ll add some of my additional thoughts, too. Plus a couple little factoids at the end.
The following is part of what I was going to share in a blog before that Quickbooks article stole my thunder! (Just kidding, it’s really good):
…you are better able to find hidden costs, reduce expenses, and maximize profits
Kathryn Pomroy
I was going to write this up in order of simpler, surface level ideas to more complex, deeper ones, but I changed my mind. Maybe it’s bad form to explain that, but it’s honest. I think it’s important to begin with the stuff that really matters to you business owners inherently, rather than make you trudge through the wonkier examples along the way. I understand that you may just read this first section and move on. And if that’s the case and you take just the one thing away, I’m ok with that.
…
Alright, enough of the wonky examples. What about your goals and dreams and vivid vision for your life personally? Your passions, the things that reignite life for you? Your Why! And how can you put your business to work to achieve those things?
To me that’s the most important and crucial Connection to make. How can all the numbers on all the reports ultimately help you achieve your goals and reach your dreams: take that amazing vacation to the Bahamas; save up for a down payment for your dream home; or simply be able to get away from work and spend more time with your family.
Without making those connections, the numbers really are just cold, calculated, black and white (and red) eye sores on a page that cause confusion, headaches and stress.
Forget that! Break free from the handcuffs of un-Clarity and lack of Control!
Start With Why. Keep your vivid vision front and center, and go after it!
- Use the historical data to see If-Then results of past behavior
- Get current to know the full financial health of the business.
- Look forward and strategize how to make your business work for you…and implement!
Clarity. Connections. Control. They’re actually all here, and they all work together in a beautiful system.
Financial Statement Fun Facts: making Connections between the reports.
1) Net income can be found on the Income Statement, Balance Sheet and Statement of Cash Flows.
2) Total Cash Balances can be found on both the Statement of Cash Flows and the Balance Sheet.
These are really useful for double checking the books, cross-referencing them to make sure something didn’t go wrong somewhere. Use this when analyzing your books, and definitely make sure your bookkeeper is doing so when they interpret your financial statements with you.
Here is the article again just for good measure.
Balance sheets: everything you need to know
If you need any help seeing these Connections and getting your financial statements interpreted, contact me! I love talking about this stuff!