What should you, as a business owner, pay attention to? Imagine you have a ready financial statement in front of you…
1. The first and very important point! (excluding reports prepared for micro-enterprises)
If you don’t prepare it yourself, at least read your management report. The management report is your company's business card. Does it look like a business card you would proudly hand to a new person? No one writes it better than the company’s leader, and it doesn’t have to be even multi-page.
2. Next is the balance sheet. Based on this, the bank assesses your solvency. I will focus on the balance sheet in a future post to explain its lines in more detail. Here I would check whether assets (what you own) and liabilities (what you owe) correspond to the actual situation. Are there inventories that were sold years ago still listed? Are all loans correctly reflected?
3. For the income statement, it’s important that all revenues generated during the financial year are recorded, along with related expenses. If you show lower revenues but give your accountant all invoices—you are at a loss; your business doesn’t look good at all. Next to it is a column showing the previous period. Sales revenue has decreased compared to last year—but you’re not growing!
4. There is an explanatory note on accounting principles that contains a lot of text unfamiliar to a manager. Review it carefully—are there typos, unnecessary line breaks, or other errors that stand out immediately?
5. Lastly, I want to highlight the note on labor costs. Pay attention that the number of employees asked for is full-time and for the entire year. Many don’t bother calculating this number precisely. The result: labor costs – 25,000 euros; number of employees – 6; average salary per month for a FULL-TIME employee – 25,000 / 6 / 12 = approximately 347 euros/month. This is an absurd figure and says nothing good about your company.
These simple details can be noticed without special preparation but play a significant role in the fate of your business.
