As a small business owner, I review certain numbers on my balance sheet almost every day, but other numbers on my balance sheet only get looked at about once a year. So what are the important numbers to track? And which ones are less vital?
Follow along as I reveal what the numbers mean to me and which ones I truly care about.
Cash
I take a peek at my checking account balance almost every day. Cash is probably one of the most important things to monitor in a small business; we never seem to have enough of it!
Your cash balance is one of the very first numbers in your balance sheet, usually under the “Current Assets” section. If you use accounting software, it may be more convenient to check its dashboard for your checking account balance than it is to pull up your balance sheet. That’s what I do.
Accounts Receivable
If you grant credit to your customers, the accounts receivable balance is what they owe you. You might also take credit cards, and if you do, there will be an amount reflected in an accounts receivable or merchants receivable account that represents the sales you’ve made but haven’t yet cleared. There’s a one- to four-day lag with most credit-card sales.
Find your accounts receivable balance under Current Assets. If your accounts receivable balance is low, it means it’s time to get some more sales coming in.
Accounts Payable
If you enter bills into your system before paying them, you will have an accounts payable balance. This balance represents what you owe to vendors, assuming you’ve entered the bills into your system.
This balance is usually found under “Current Liabilities.”
A Quick-and-Dirty Cash Forecast
The balance sheet starts to get a little more fun when you put some of the numbers together. For service businesses, you can even do a very quick-and-dirty cash forecast by adding together your cash and accounts receivable balance, then subtracting accounts payable and any payrolls and loan payments due in the next 30 days.
It won’t be completely accurate, but it will give you a peek. Your accountant can always help you create a full-blown cash forecast if you need one.
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