WHAT ARE FINANCIAL STATEMENTS FOR?

Over the last several years I have trained accountants and entrepreneurs in various aspects of business financial planning. My favorite question that I love to ask my audience is…What are financial statements for?

I get the following answer from entrepreneurs and even accountants:

To secure a bank loan.
To complete a tax return.
To impress investors.

After they tell me those three items…there is usually silence.

The purpose of a financial statement is to help the business make a profit. It is so rare that I hear that answer. Why is it that financial statement data is rarely viewed as a tool for making a profit?

The answer? Most entrepreneurs and accountants don’t know how to use financial statements to help them make a profit. They use them for the three reasons I indicated above,

Yet, as the owner-manager of your company, you are responsible for monitoring, managing, and evaluating the results of all that activity. The buck stops with you.

Source: Don't Bust the Budget, Granville Publications

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