Creating financial statements can seem tedious and complicated, but preparing these documents is a vital part of planning for the year ahead. Financial statements make up a large part of the projections and planning for your business’s future and can give you strategic guidance on crucial changes to make to ensure sustained success.
How financial statements can help you plan for the year ahead
While you are preparing your financial statements, you will become more aware of the status of your business’ finances, the progress you are making towards your goals, and will give you a clear view of any issues you might face down the road.
Financial status overview
Keeping close tabs on the financial status of your business is a must. The financial statements offer a summary of your business’s financial position. They can provide you with the information you need to help you set goals and understand where you might need to change your budget. If you regularly work through your financial statements, you will pick up any issues at an early stage, and you can make small changes before the finances go off the rails.
Relating business goals into specific business targets
The financial status overview is a powerful tool to help you create specific targets that will drive your business strategy towards achieving the goals you have set out for any given year. The adage goes that failing to plan means planning to fail, and it holds true in a business context.
Measured targets will help to keep your business on track and will provide employees with structured outcomes to work towards. By creating specific targets, you can practically set out a roadmap that will lead your business to its goals, instead of making decisions on the fly without proper planning to back up actions. Through specific targets, you will be able to create a sustainable pace for the business while leaving room for direction changes necessitated by external factors that influence the business strategy.
Your financial statements contribute to most planning and strategic decisions and can help you measure the progress within your set of goals. If you have carefully set out specific business targets, the progress measurement process will be easier to manage. The business’s financial statements can give you a higher-level overview of the progress, even if you do not measure specific targets. When comparing the financial statements across several years, you can track how the business is progressing towards its goals on a year-by-year basis, giving you valuable insights into the overall development of the company.
Identifying potential issues
When you study the financial statements for the previous years, you can compare the financial situation to your business forecast to see if you might run into problems relating to cash flow and inventory, among others. It is especially important to use your financial statements when planning the goals you want to achieve in the business to identify shortfalls and plan out budgets to cover the activities you plan to undertake for the following year.
If you need assistance from our accounting service experts on your financial statements, taxes, and other financial planning activities, contact Georgen Scarborough Associates, PC, for more information.