As a business owner, you are more than likely always looking for ways to take your business to the next level. To make goals and plan for the future of your business, you have to know where your business stands today. The best way to do that is with an income statement which many will argue is the most important financial statement for any successful business. Propel Your Accounting is here to talk about an income statement and what makes it so important.
Understanding What an Income Statement Is
An income statement goes by many names. Some of the most common include profit and loss statement, statement of earnings, statement of operations, and revenue statement, to name a few. When you take a look at a company’s income statement you can see sales and revenue, costs, gross profit, expenditures, estimated taxes, net profit and more. All of these figures are organized in an easier way to understand them so that business owners can have a good understanding of where their business stands.
Why an Income Statement is so Important?
Any document that can show the profits and losses for a company over a long period of time can be helpful for a number of reasons.
– Tracks Profitability: This can be helpful for owners, shareholders, and other stakeholders as it gives them a clear picture of where the company stands financially.
– Makes Decision-Making Easy: As a company owner has a clear picture of the finances for their company, they are able to fast and wise decisions about new expenditures that may come up.
– Ensures Tax Compliance: Knowing your tax liability is crucial to any successful business.
– Tracks Cost of Goods: Part of profitability is to be able to track the cost of goods. Owners need to be able to see production or purchase expenses as a product of sales.
– Strategic Planning: To make plans for a company’s future, you have to be able to see their financial standing. An income statement allows company owners to make strategic planning decisions that impact growth opportunities, impact financial health, evaluate risks, and allocating resources.
– Mergers & Acquisitions Decisions: Any potential acquirers will look at the income statement right away to see if the company is profitable. Seeing whether or not a company is in the red will help make the decision an easy one.
– Strengthened Benchmarking Process: Business owners can determine ways to improve their efficiency and build value in the marketplace.
Bookkeeping, Accounting, Business Consulting & HR / Admin Services in the United States of America
At Propel Your Accounting, we know how vital your financial statements are to the success of your company. We will help you keep all of those records organized and up to date so that you can make your business decisions with confidence. We will partner with you to make your business successful. Call us today!
