Page 86 - MICROHUB Handbook - ENGLISH

There are four main financial planning and forecasting documents that

every small business owner should produce and regularly maintain.

Those documents are:

1.Balance sheet: A balance sheet provides you with a current picture
of your company's financial situation at any given time. There are three

components to a balance sheet: assets, liabilities, and equity. The net

worth of your company can always be determined using these three

pieces of financial data. A positive balance on the balance sheet

indicates that your small business is based on sound

financial principles. The balance sheet also provides

a clear picture of the business's financing to outside

parties like the bank and potential investors. Liabilities

will be worth more if you lack the capital to participate

in the company yourself (equity).

2. Profit and loss statement: The

business's annual income and costs are

summarised in a profit and loss

statement. You may determine your

net profit or loss for the time period
using those numbers.

Your ability to track your profitability

over time and, more importantly,

identify your breakeven point (the

amount of income needed to cover all

operating costs) depend on maintaining

an accurate profit and loss statement.

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