You've finally turned your dream into reality and gotten your business off the ground. You're focused on your product, your customers, and the great service you're providing. You don't have time to worry about your finances right now. The numbers will sort themselves out, right? Unfortunately, it's not that easy. Ignoring your finances for too long can result in disaster. Whether you like it or not, it's important to account for your start-up's assets and expenses. You can use these three financial documents to help ensure the sustainability of your business: 1. Income Statement The income statement is sometimes referred to as the profit-and-loss statement. It tells you how much money you're making (your profit) and how much money you're spending (your loss). There are a few important calculations to take away from this document. Analyzing each one can help you narrow down areas of concern for your business. Here they are: • Gross profit o This number is found by taking your total income, then subtracting your direct costs. Direct costs include all the expenses directly related to making your product or providing your service. • Operating income o Sometimes called "earnings before interest and taxes" or EBIT, this number is found by taking your gross profit and subtracting overhead expenses like marketing and insurance. • Net income o Take all remaining expenses, like tax and interest, away from your operating income and you're left with your start-up's net income. 2. Balance Sheet The balance sheet is broken down into two main sections. One tells you how much you own while the other tells you how much you owe: • Assets o This side includes both your short-term assets (things like cash and inventory) as well as long-term assets (land, vehicles, etc.). • Liabilities and shareholders' equity o Your liabilities can be considered either short-term (such as accounts payable or credit card debt) or long-term (things like term loans). Shareholder's equity includes money from investors or reinvested profits. Note that the two sides of the balance sheet will always equal one another. 3. Cash Flow Projections It's always good to plan ahead. You can create cash flow projections to predict when the money will be pouring in and when money will be tight. These predictions can be used to influence your spending decisions and prepare for any rough times on the horizon. How Can I Get These Documents? If you're a do-it-yourself sort of business owner, you can find all sorts of accounting software out there to give you the tools you need to track your start-up's assets and expenses and put these documents together. If you need a little more assistance, E&E is here for you. Feel free to contact us for help with your financial documents or for any of your start-up's other accounting needs.

Tax Planning Essentials For Businesses

Small Business Expenses in Canada: Eligible Interest and Bank Charges

Read

How to Expense Mileage, Entertainment & Meals

Read

5 Office Related Tax Write Offs for Canadian Small Businesses

Read

Tax Deductions in Canada You May Not Be Aware Of

Read

A Guide to Advertising Tax Deductions for Canadian Small Businesses

Read

6 Basic Tax Write Offs in Canada for Small Business

Read

Do you have tax-related questions about your small business?

BOOK A CONSULTATION

with one of our tax planning experts and determine

how you can maximize your tax savings for your business’ year-end.

  • Solve Captcha

Who we are

We are a leading accounting firm in the Mississauga area. Our unique insight comes from being founded and managed by an experienced corporate auditor and a former CRA tax auditor. We work with you to align your tax planning and business strategies.