Archive for June 18th, 2012
Can you drive having a blindfold on?
Obviously you wouldn’t want to place your existence at the disposal of blind belief. This is just what an entrepreneur does if he is able to not read and understand Financial Statements. Financial Statements not just let you know in which you business continues to be and wether it’s made it or flourished but additionally where chances are it will be later on.
So first of all Financial Statements are crucial tools for understanding and running your company, yet that’s only some of the reason behind them. The next true story will illustrate just how much lack of knowledge of the practical understanding might cost you.
Eventually, a guy walked in and stated, “I wish to buy this place.” If someone is available in and wishes to purchase your business, they often create a generous offer since they’re searching to purchase rather than you needing to sell. Along with a generous offers are what David got – a deal of $two million. However the deal never experienced. Why?
Because once the potential buyer requested to determine the prior year’s taxes, David happily handed it over. (Ok now what you need to understand here is, a taxes basically combines and summarizes two areas of a financial statement, your earnings statement as well as your balance sheet.) This tell’s anybody who reads it just how much money you have been making where it has been going.
If David had read and understood his return, he’d haven’t have handed it over, since the buyer required one look and understood instantly the balance sheet was bogus – the return demonstrated huge amount of money for your year but a listing of under $10,000.
How could David have avoided the collapse of the $two million deal ?
Simple. If he’d understood that financial statements would be the vital statistics associated with a business, he’d have known what his balance sheet must have appeared as if. He’d have taken steps that his financial statements were accurate. And that he would not have proven a bogus go back to a possible buyer.
So what is the moral from the story?
It’s that ultimately, you are responsible for your own personel business and it is financial statements. It’s fine to depend on another person to organize your financial statements, but you shouldn’t depend on other people to know them for you personally.
Are you able to make a contractor who does not know ways to use the tools of his trade? He would not be running a business very lengthy. Well, your financial statements are very important tool that demonstrate you what shape your company is in and just how to really make it more lucrative.
How will you expect your company to outlive and grow if you do not understand or know ways to use the financial documents (tax statements and financial statements) that you are having to pay an accountant or CPA to organize?