Income and expense statement template, Financial Statements are a group of statistics and scores not unlike the scores and statistics which show up after a sports match. For a sports team owner or manager, the statistics, replays, opinions, and the score, are a very important part of analyzing, tweaking and improving the match. They’d never dismiss them. It’s their way of increasing the success rate. By comparison, company owners and managers, more frequently than not, it appears, view their financial statements as a necessary evil to satisfy the I.R.S.. They are totally unaware of their ability of these reports, or they simply decide to discount them. Many business owners are happy to turn the reports over to a bookkeeper or accountant to analyze.
So, what is wrong with this? Well, for starters, even once the business owner doesn’t use the financial reports as a tool, profitability is based more on luck than strategy.
Take forecasting the profitability of the business for example. Without knowledge of previous performance, how do you produce reasonable funding numbers? When done properly, there’ll be at least two components, historical performance and expansion projection. However, should you not clearly understand what’s happening in your business, what small or significant changes will you make? Do you have the ideal combination of employees? Are there any product lines which aren’t profitable? Is your pricing correct? How about your overhead, how can this be improved or is it in accordance with industry standards? How do you improve your score? Are you aware when there is a black hole draining your profits?
Then, there is the control problem. Who’s controlling your business? Do you’ve got controls in place? From experience, I will tell you that when the owner does not know what’s going on with the finances of the business, there’s ample room for corruption. Would you know if somebody had been stealing from you? Occasionally it is little seemingly insignificant skimming and other times it’s similar to grand theft. It happens all the time and the company owner is often completely oblivious.
You can get far better results if you can make an investigation of unique things in a better way and also understand how things will impact considering previous years trends. Actually pro forma financial statements serve as the foundation stone of making things crystal clear and quite according to the demands of your company in the coming days. That is why this report is used as the foundation of analyzing and comparing different types of information. That means you may find a feel to manage the things in a better and effective way.