Balance sheet is a key financial statement for every organization. It has been designed to evaluate your organization’s total assets and liabilities. It allows businesses to effectively manage all their accounts. Also, it will help you to analyze the financial standing of your organization in the market.
Balance Sheet Template For Small Business!
An excel template will allow you to carefully assess the growth rate or the decline rate of your business. You can make significant controlling and budgeting decisions about your business with the help of an effective spreadsheet. It typically includes information about various assets, liabilities (including long term and short term loans, shareholder’s equity, bonds, etc) and inventories.
Usually, any investor or lender will make decisions about their investment and financing within an organization after carefully analyzing their financial statements. Hence, it should be effectively designed.
In any small company, regardless of it being a partnership venture or a sole proprietorship firm, its financial statement will display the financial stability of that organization. A balance sheet essentially comprises of 3 key aspects such as assets, liabilities and total equity.
Top 6 Things To Consider For Creating Highly Accurate Financial Statements!
While preparing financial statements for your business, you should take care of a few things to ensure greater accuracy. Listed below are a few significant tips:
1. Carefully fill the value of your assets and ensure that every asset has been taken into consideration.
2. All those assets whose value necessarily needs to be computed, include real estate, office equipments, office furniture, investments, cash available in the bank account and outstanding amount of money yet to be received.
3. Compute your liabilities accurately. It should include mortgages, loans, lease and all other outstanding amounts that are payable outside.
4. Typically, a company’s statement of their financial position, will present the total assets and liabilities in two different sections. The total of the same should always balance. In case, the sheet doesn’t reflect the same total amount in both assets and liabilities column, it will have to be redrawn.
5. Needless to mention, for an organization to be profitable, their liabilities must be lesser than their assets. The resulting difference in the amounts will show the ‘net worth’ of this company.
6. After you have finished the above steps, your template will compute the owner’s equity. This is calculated by deducting the total liabilities from the total assets. You will get the estimated value of your company by taking a look at the resultant value.
After you have put all the details and values in a proper template, your financial statement is ready. You are now ready to declare an accurate value of your business. If you aren’t familiar to such spreadsheets and are wondering how to use it, you could search the internet and find several easy ways to use excel templates.
Several websites offer excel sheet templates that are either free for download or are available for a small fee. A free template will allow a small business or a sole proprietor to keep records of more than one year. It will allow you to maintain monthly records as well.
You can choose to download a balance sheet template for small business depending upon its benefits and features. Also, always check which operating system will it work on. Most templates will work with the Microsoft Excel program. These can also be easily modified as per your business demands.
Why Is It Important?
A balance sheet will declare where your business stands at any given moment in time. Also, it offers valuable information about your business viability. It will also help lenders and potential investors ascertain the safety of their investments by looking at your financial statements in conjunction with your business income statements, statements of retained earnings and cash flow statements.
This is exactly why a smart entrepreneur should understand the importance of the information displayed on them. A key reason these financial statements are so important for you and for every potential investor or lender, is that these are representative of your business. It will present greater clarity in the following key business areas:
1. It will tell you how your business is put together and what are its principal resources.
2. It will also tell you the areas where potential risks lie.
3. It is best used in conjunction with various other income statements.
4. Look for risky and profitable trends over time.
5. Check the ratios and balances and assess which direction is your company heading in.
6. Look for potential areas to help you cut costs and perform more efficiently.
Why Small Businesses Require Specialized Templates?
New businesses could use proforma or projected balance sheets. These worksheets are prepared in order to also include your business plans for an ongoing business. These can be prepared customized to your business needs indicating significant capital/asset financing or investment.
Managing The Asset Side:
Prepare a list of all assets including intangible and tangible properties, cash at bank, cash in hand, buildings, equipments etc. Create different categories like investments, cash, accounts receivables, furniture, other property and vehicles etc.
Assets can be further divided into various categories such as long term assets and current assets.
i. Current assets – Saving accounts, cash and any other funds, will fall into the current asset section. This is because these are easily accessible.
ii. Long term assets – These include all those assets which have a future maturity value greater than one year such as retirement fund, real estate building, life insurance etc.
Managing The Liability Side:
Any future bills, mortgage balance, bills due, taxes, accounts payable and all other due payments, should be written off under the liability section.
i. Current Liabilities – It includes utility bills, credit card bills and various other bills
ii. Long Term Liabilities – It includes those liabilities that have one year payment period such as taxes, car loan, mortgage loans etc.
After dividing all your business assets into various categories, you will find it easy to calculate the net worth of your business.
It is necessary to keep your financial statements updated on a regular basis in order to get an up-to-date and clear picture for your business.