financials - Linkenheimer LLP CPAs & Advisors

Business Owners, Your Financial Statements Are Trying To Tell You Something

Business owners are commonly and rightfully urged to regularly generate financial statements in compliance with Generally Accepted Accounting Principles (GAAP). One reason why is external users of financial statements, such as lenders and investors, place greater trust in financial reporting done under the rigorous standards of GAAP.

But that’s not the only reason. GAAP-compliant financial statements can reveal details of your company’s financial performance that you and your leadership team may otherwise not notice until a major problem has developed.

Earnings are only the beginning

Let’s begin with the income statement (also known as the profit and loss statement). It provides an overview of revenue, expenses and earnings over a given period.

Many business owners focus only on earnings in the income statement, which is understandable. You presumably went into business to make money. However, though revenue and profit trends are certainly important, they aren’t the only metrics that matter.

By Linkenheimer LLP|2024-03-27T18:19:50+00:00March 27th, 2024|business, Financial Reporting Framework|0 Comments

Let Your Financial Statements Guide You To Optimal Business Decisions

Now that 2022 is up and running, business owners can expect to face a few challenges and tough choices as the year rolls along. No matter how busy things get, don’t forget about an easily accessible and highly informative resource that’s probably just a few clicks away: your financial statements.

Assuming you follow U.S. Generally Accepted Accounting Principles (GAAP) or similar reporting standards, your financial statements will comprise three major components: an income statement, a balance sheet and a statement of cash flows. Each one contains different, but equally important, information about your company’s financial performance. Together, they can help you and your leadership team make optimal business decisions.

Revenue and expenses

The first component of your financial statements is the income statement. It shows revenue and expenses over a given accounting period. A commonly used term when discussing income statements is “net income.” This is the income remaining after you’ve paid all expenses, including taxes.

It’s also important to check out “gross profit.” This is the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of direct labor and materials, as well as any manufacturing overhead […]

By Linkenheimer LLP|2022-01-28T19:27:09+00:00January 28th, 2022|business, Financial Reporting Framework, tax planning|0 Comments

At the Very Least, Update the Financials in Your Business Plan

Every new company should launch with a business plan and keep it updated. Generally, such a plan will comprise six sections: executive summary, business description, industry and marketing analysis, management team description, implementation plan, and financials.

Now, ideally, you would comprehensively update each section every year. But if the size, shape and objectives of your company haven’t changed all that much, you may not need to make major revisions to the entire plan. However, at the very least, you should always review and revise your financials.

Explain your route

Lenders, investors and other interested parties understand that descriptions of a business or industry analysis may be subject to interpretation. But financials are a different matter — they need to add up (literally and figuratively) and contain realistic projections in today’s dollars.

For example, suppose a company with $10 million in sales in 2019 expects to double that figure over a three-year […]

By Linkenheimer LLP|2020-09-03T20:03:33+00:00October 23rd, 2019|business, planning, strategy|0 Comments

For Best Results, Start Your Strategic Planning Early

Time flies when you’re having fun — and running a business. Although it’s probably too early to start chilling a bottle of bubbly for New Year’s Eve, it’s certainly not too early for business owners to start doing some strategic planning for next year. Here are some ways to get started.

Begin with your financials

A good place to find inspiration for strategic objectives is your financial statements. They’ll tell you whether you’re excelling or struggling so you can decide how strategically ambitious or cautious to be in the coming year.

Use the numbers to look at key performance indicators such as gross profit, which tells you how much money you made after your production and selling costs were paid. It’s calculated by subtracting the cost of […]

By Linkenheimer LLP|2020-09-03T20:03:40+00:00September 16th, 2019|business, planning, strategy|0 Comments

A Midyear Review Should Go Beyond Financials

Every year is a journey for a business. You begin with a set of objectives for the months ahead, probably encounter a few bumps along the way and, hopefully, reach your destination with some success and a few lessons learned.

The middle of the year is the perfect time to stop for a breather. A midyear review can help you and your management team determine which objectives are still “meetable” and which ones may need tweaking or perhaps even elimination.

Naturally, this will involve looking at your financials. There are various metrics that can tell you whether your cash flow is strong and debt load manageable, and if your profitability goals are within reach. But don’t stop there.

3 key areas

Here are three other key areas of your business to review at midyear:

1. HR. Your people are your most valuable asset. […]

By Linkenheimer LLP|2020-09-03T20:04:38+00:00June 14th, 2018|business, strategy|0 Comments