A survey on small businesses and their accounting habits showed that 60 percent of entrepreneurs felt that they did not have the required skills to manage their financial flow. Unfortunately, a proximately 82 percent of startups will fail because their cash flow is negative. The negative flow is attributed to failure to monitor daily financial activities because it is expensive to hire an Accountant. It eventually leads to the collapse of most businesses by the 5th to the 10th year.
Financial experts insist on keeping a balance sheet to monitor your assets, liabilities, and equity position. The information generated by the balance sheet will help an entrepreneur to make prudent financial decisions for the business.
What Is Accounting Balance Sheet?
A balance sheet is a record of the financial position of a business at a particular time. It captures details about your liabilities, assets, and equity position. Simply put, the balance sheet will give the actual net worth of any business.
A balance sheet is prepared for a particular period like a day, week, month, and year, among other preferred durations. A progressive look at the intervals will give you an idea of how your business is performing. You can determine whether it is making any profit or you are headed to closure due to losses. You can also determine whether you will get to the desired financial goals based on the prevailing performance. It will give you a clear idea of areas that need improvement if certain financial goals are to be achieved.
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