Financial Reports – P/L & Balance Sheet

When it comes to the world of accounting, some of the most common reports include the profit and loss report and the balance sheet. Whether you are working with someone or trying to figure out your finances on your own, knowing all about these reports can be beneficial to improving your finances.

What is a P/L and Balance Sheet Report?

A profit and loss (P/L) report can capture how much money you’re making (or losing) within a certain time period. (A month, quarterly, a year, etc.) A P/L report may also be known as an income statement, statement of earnings, or statement of operations. Some key components of a P/L report are revenue, cost of goods sold (COGS), Gross profit, Expenses, and Net profit(loss). Revenue is how much money you’ve made without including any COGS or expenses. COGS are the costs for your business to deliver goods and services. This includes things like materials, labor, and shipping. Gross profit is the money you’ve made by subtracting COGS from your Revenue. Expenses are split into two categories: Direct & Indirect. Direct expenses are typically COGS as they are the items needed to make/deliver the service. Indirect expenses include things like utilities, rent, and fuel. Indirect expenses will never be counted as COGS. Net profit is the remaining money after you have subtracted COGS & expenses from your revenue. Net profit would be the actual profit (or loss) for your business in said time period. nn The balance sheet is the overall financial position of the business. It shows what you owe as well as what you own. This is determined by assets and liabilities. An asset is something you own. There are two types of assets: Current and noncurrent. Current assets are anything that can be converted into cash within a year whereas noncurrent is anything that takes longer than a year. There are also current and noncurrent liabilities as well. With current liabilities being items due within a year and noncurrent due after a year.

How do these reports help me determine my finances? How do I use them effectively?

The P/L report is a clear way to see whether you have gained or lost money that month. Additionally, the P/L report allows you to see what expenses are costing more and see how often money is coming through. This is beneficial because it can make predicting future revenue trends more accurate, thus allowing you to budget better and stay on track with your goals. nn The balance sheet is helpful for quite a few reasons. For one, it can help you decide if you are able to expand your business by knowing if you can manage the money that floats in and out or if you need to focus on receiving more cash. Another way the balance sheet is useful is by helping the company see if they are prospering or failing. This can give way to a company changing its policies, correcting more mistakes, and refocusing its goals to better align with the state of the business. Additionally, the balance sheet is important to potential investors or those looking to buy your company because it allows them to see whether the business is worth the investment since you can see everything due, paid, and what the business is like without these things.

Financial reports are helpful

Although there are many ways to look at financials in a business, knowing the fundamentals of the P/L report and the balance sheet is a very helpful step in knowing the state of your business

Building Your Business for Success

A study by Guidant shows that a little less than ⅓ of business owners said that their biggest motivation for starting a business is that they are ready to be their own boss. If you’ve decided that you want to open your own business, there are numerous ways to create a successful business, but the first place to start is defining success for you.

What does success mean to you? How do you create a successful starting ground for your business?

When first thinking of creating a business, many of us have different motivating reasons why but, of course, we all want to be successful. Success for many of us means profit but success could also mean you want to help people (solve problems) or you’re extremely passionate about sharing your hobby with others. Defining success for you is the first step in creating value in your business. This is a critical step because knowing what success means to you allows you to focus your time and energy on what matters most (to you). Even with our different definitions of success, there are quite a few things that help make a business successful.

For starters, have a strong business idea. You will want to pick a good, niche thing in your industry of choice. This means picking something that isn’t too specific nor too broad. Digging deep and learning more about your niche may help you to decide what exactly you are putting into the market to help everyone and allows you to become more knowledgeable in your future business overall. Furthermore, bear in mind the current market demand for your product/service. (Does your target audience want/need this? Is the market already over-saturated with this?) When you have a general concept of what your business idea is, consider talking to your friends and family. They may give you valuable feedback that is more suitable and aid in looking at the possible faults of your idea. After you’ve solidified what your business idea is, be sure not to over-sell your product/service. Over-selling could mean falsely advertising things your product doesn’t actually do or setting a bar too high and going over your area of (current) expertise. Also, set clear policies for everyone. By doing this from the beginning, it can reduce confusion for everyone and protect you from potential conflict down the road.

Defining success & having a solid, concrete idea is just the beginning of owning a business. Even though there are many factors in the success of a business, there are plenty of ways to make your business shine!

Business building tips for success

As is life, there are many factors outside of our control that can influence the success of our business. By being proactive to these outside influences, you can enhance your business for success. To begin, your leadership and the team behind you are vital. As a business owner, be sure to practice intentional kindness. A good leader is kind as well as honest, transparent, and genuine. Kindness plays into how customers perceive your business as well as employee morale. (Refer to Kindness & Its Value In Your Business as we covered more about kindness & the value it brings to your business!) When you are a great leader, your team benefits, too. As we covered in Well Put-Together Teams & Their Significance, having a high quality team boosts profit, productivity, and helps all business relationships flourish!

The next essential part of your business are the customers. When handling customers, remember that you are the leading expert in your business, so be sure to look at your products/services from their point of view. Understanding where a customer is coming from can mitigate any challenges that may come up. Although you should try your best to solve any issues before they reach the customer, it is inevitable that problems will arise from time to time. Spending time to make sure employees are especially equipped to deal with customers can create a better experience for everyone involved. Additionally, if an employee brings feedback about the customer service back to you, truly hear them out and take action to resolve the issue so it doesn’t happen again. Another way to enhance the customer experience is connecting with them via gifts (like nice baskets from your business or a simple hand-written thank you) because this creates a personal connection and makes the customer feel even more significant to your business. Finally, who doesn’t love a great deal? Hosting deals like BOGO (Buy one get one free), having a free trial period, and creating loyalty or referral programs incentivizes customers to spread the word about your business and be rewarded for it.

Moving to our next point, make sure your business reflects you as a person. Your morals should clearly be reflected in the company and your personality should radiate through! An impactful way to show who you are through your business is in your advertising and marketing. By being authentic in your social media posts, those who resonate with your morales will be more drawn to your business – attracting them and possibly others to your business. In addition to original content, try to include more than just ads or promotions. Having segments where you give something, like a guide to a monthly calendar if you’re in the fitness industry or a weekly column where you write up advice in your industry, can make your social media more appealing. Additionally, in our digital world, traditional marketing is often getting left behind. In a 2017 study by MarketingSherpa, consumers were asked what ads they trust the most. The top scoring categories include: print ads (82%), TV ads (80%), mailer ads (76%), radio ads (71%), and ads in public places (like billboards or posters) (69%) while the lowest scoring ones include: online pop-ups (25%), podcast ads (37%), and mobile phone ads (39%). This goes to show that traditional marketing is still as beneficial as digital marketing! For more tips on how to market yourself and your business digitally, you can refer to one of our previous monthly blogs: Advertising & Marketing For You and Your Business.

Taking on a new business can be daunting and overwhelming by yourself. Although it is often appealing to independent business owners to do everything themself, (to try to save money), it is in one’s best interest to hire others to ease the load. Besides employees of course, an accountant can be a valuable asset for your business. Accountants guide you in the right direction to make your company more financially well-off. They have detailed experience and save you time by being precise and accurate when it comes to reporting, doing the finances for you (instead of you doing everything yourself), and creating a budget/ plan to put you in the best financial state. In our previous monthly blogs, we cover the differences between CPAs, accountants, and bookkeepers (Accountants vs. CPAs vs. Bookkeepers) more in depth and how to find the right accountant (Accountant Lingo & Finding the Right Accountant). Additionally, don’t shy away from receiving coaching from other successful business owners in your industry. In a study from the Small Firms Economic Development Initiative, 70% of small businesses that received mentorship from experienced business owners survive their first year in comparison to 35% those who do not receive the same type of mentorship.

When others help you in your business, it grants you more time for yourself. Frequently, as an independent business owner, free time is seen as more time to generate more sales. While this is not necessarily false, it is imperative to take time for yourself outside of work. A common quote in the self-care world is, “You can’t pour from an empty cup,” and this means that you can’t take care of everyone else (everything else) unless you take care of yourself first. Additional time for yourself doesn’t have to be staying at home watching TV/playing games all day, it could also look like discovering new hobbies outside of work which could, in turn, expand your network even further. When you are well rested and have a good work-life balance, it, naturally, makes you happier. Happiness is Essential in Work because it motivates you, makes others see you as a better leader, and has a direct effect on employee health and productivity.

Business Success has many Factors

The world is ever-changing and this includes your business as well. Take care to always adapt to new employee & customer feedback and keep up with new trends in your industry. A successful business is created from a culmination of many different factors but by being well-prepared and adaptable to the world around you, you can create a successful business!

Advertising & Marketing For You and Your Business

When it comes to owning a business, or even trying to branch out as yourself, everyone knows that you must do some advertising and marketing. Though this can feel like a daunting task, it doesn’t have to be! There’s a multitude of ways to advertise yourself and your business whether it be for free or if you have the freedom to spend a little cash.

Marketing Yourself

Before we start with advertising your business, it’s important you market yourself just as well! As a business owner, the way you present yourself has an impact on your business. Even if you are not a business owner, it’s just as important to create a good name for yourself. First and foremost, you want to be yourself! Being authentic allows those similar to you to find you and gives way to the kind of company you want to be a part of/are a part of. Next, become a master in your field. Although a big part of being a professional in a job comes with experience, you can still take time to study, read, or even watch videos about different topics in your field. Having a wide range of knowledge and lesser known information in your field can give better insight to more problems and helps you to stand out from everyone else.

In our digital age, social media is a necessity that can expand you (and your business) anywhere you want it to go! If you are creating a new social media, there are various choices in picking the right platform, so think about your target audience and what you think will reach them best. Stay true to yourself as customers will be more likely to bond with you/your company when they see a genuine side to you. Another way to stay online is to join an online community. This may help you expand out more and/or learn more from others all over. Outside of the digital world, don’t be afraid to network! Going to tradeshows, local events, or skill workshops can open an opportunity to meet like-minded people and talk about you and your business even more.

Advertising your Business

When it comes to advertising for your business, there are many ways to make your business more distinguishable than the rest. For starters, everything begins with a quality website. Even though having a website will usually cost you money, it is a must have expense. Websites are your home base for everything; it shows what your business has to offer, ways to reach out to you, and gives an idea of what your company is like. In your website, consider creating a blog. The blog should center around answering questions or giving advice to certain topics that are in your field. Having a blog grants the opportunity for more clients to find you when searching for information related to what you’re writing. This is because search engines pull keywords from the text you write; so the more you write, the more likely you are to be seen. According to a study done by First Page Sage, consistent publication of high-quality content is the number one factor in high search engine optimization (SEO). Additionally, think about having an email marketing campaign. You can send your blogs out in the email campaign or simply update customers on the newest things that are happening. Don’t forget to add a call to action in your emails! A call to action prompts customers to get in touch with you quickly and efficiently about any questions, comments, or concerns they may have.

Earlier we brought up SEO. SEO can be extremely beneficial as a means for free advertising for your company. There are a considerable amount of ways to improve SEO as it is a collection of different algorithms that improve your ranking on Google. One way to help improve SEO is to make sure you fill out every category on your Google’s business page with the most important being your company’s name, address, and phone number. Furthermore, creating a (free) Google My Business account will allow you to verify your business page on Google, increasing your SEO as well. Another way to boost SEO is to create listings on major directories. Directories show off your business’s contact information. By adding yourself into the larger ones, the lesser known ones will automatically pull information from the bigger ones; thus, your business will show up in more places. Some examples of free and large directories include: Yelp, Bing, and the Better Business Bureau. Bear in mind, there are multiple ways to increase your SEO and it takes time to increase so don’t stress if it doesn’t all change immediately!

Now that we’ve talked about quite a few ways to advertise for free (for the most part), there are a few ways to advertise by spending some money. First off, and the most straightforward, Google, YouTube, and Facebook Ads. In Google, this puts you above organic listings; automatically giving you a headstart in advertising. Next, creating promotional merchandise can have a profound effect on your company. In a study done by the British Promotional Merchandise Association, 77% people said they appreciate promotional merchandise with 78% of people keeping their merchandise for a long time. When creating merchandise, keep in mind that you will want these products to serve your target audience well. Also, take into consideration if these items will be reusable or if they are eco-friendly as these factors impact customers. In addition to handing out promotional merchandise, you could also host giveaways or competitions to win them instead. This gets the word to spread about your business and creates excitement within your community.

In what other ways is advertising important?

Advertising is more than just how many sales you can bring in. It helps to inform customers of your products/services and introduces new products/services as well. Advertising influences the way people see your business too. By showing your values and having a strong mission statement, this enhances customer trust and magnifies your business’s identity. As your business grows and your advertising reaches more people, this makes it easier to monitor supply & demand as well as see your target audience more clearly. Last but not least, working for a business that is well received and talked about will make employees feel good about their jobs. All of this boosts employee morale and means employees are more likely to spread the word about their company.

Advertising and Marketing Comes in Many Forms

In regards to advertising and marketing, there are numerous ways to make your business stand out from all the rest! Don’t forget to check out the following blogs, from us: Business Models & Their Importance, Social Media Presence, and Kindness & Its Value In Your Business, as they tie into many things we talked about earlier. (Having a target audience, social media tips and why it’s important, and why having high employee morale is important alongside the significance of reviews!)