Financial statements help you and your investors measure the current health of your business, while projections help you prepare for what may lay ahead. Both must be prepared carefully, so that they offer an accurate picture of the health of your business that will help you decide how to move forward. Projection of your expenses and sales is invaluable in helping you create a cash flow budget for your business. Profit and loss (P & L) projections are not financial statements, but they are a solid tool and guide to help you forecast your income and expenses.
Working on your financial projections each quarter (or at least each year) is one of the most important things you can do for your business. Creating projections for your business helps you create targets and goals, check your progress, and anticipate problems. Working on your projections allows you to step back from your business and get a more objective look and where your company is, where it is going, and helping you create a path to get to where you want to be.
A solid understanding of financial statements is essential to the health of your business. Financial statements help point you and your business in the right direction. There are three main business financial statements that every business owner should be familiar with: the income statement, the balance sheet, and the cash flow statement. Financial statements show the revenue sources, expense categories, and assets and liabilities of your company. Get information and templates to guide you through the process of preparing financial statements and projections.