Speaker 1 (00:00):
Hi. So it’s been awhile. Uh, it started off with some technical difficulties last week and then turned into a huge dose of mom life. And, um, so here I am. So I am going to share with you today an episode that was rerecorded last week, um, on Friday, but never got uploaded, never got uploaded Tuesday. So here we are on Thursday. So you may hear me talk about last week, but it is what it is. It’s good stuff. I want to put it out there. So here you go with today’s episode.
Speaker 2 (00:48):
Hey, business-minded mama. I’m so grateful that you are here and that you are ready to grow enough, authentic community and scale your impact. Hi, I’m Stephanie. Parenza the voice behind business-minded mama podcast, local and small business advocate and entrepreneur. I’ve created this community because I want to help business minded mamas. Like you build your dream business by finding your authentic community and gaining control and clarity on the financial aspects of your business by managing your own books. Now let’s tap into your own potential.
Speaker 1 (01:31):
Hello and happy Friday. I am re recording this episode because I used my phone yesterday while I was sitting and waiting for my daughter to complete her piano lesson. And at some point around minute three 17, my phone decided to stop recording. I don’t really know. All I know is when I went to upload it last night, I realized there was a huge chunk missing from what I wanted to share. So we’re trying this again at my computer with my microphone. So I’m hoping I can get my message across to you today too. I felt so good about what I shared yesterday. So what I wanted to bring to you today is, um, the topic of financial statements. And while there are a few different or handful of them out there that are important as an entrepreneur or small business and influencer, I really think you only need to pay attention to two of them.
Speaker 1 (02:51):
At this point, these two, the profit and loss and the balance sheet are probably the most, um, critical statements for you. It’s a small business. Unfortunately, I also know that the balance sheet often gets overlooked. And so I really want to dig a little deeper into that and share the importance of why I think you should start looking at that as well as the profit and loss, which you may already be familiar with. I hope you are because it is very vital in your business to know what your profit or loss is. Anyways, these two statements you should definitely be looking at at least monthly so that you’re aware of where your business stands financially. All right, let’s start with the balance sheet. So the balance sheet I feel is often overlooked because you as a entrepreneur or small business, unless a bank or some, someone is requesting to view it, you’re not technically required to show it anywhere.
Speaker 1 (04:07):
Even on your schedule C in your tax returns, you most likely are not required to put that information on there. I suggest you do, but you’re not required. And I think because you’re not required, I think often it is overlooked. So the balance sheet let’s do a little overview about the balance sheet. The balance sheet is comprised of assets, liabilities, and equity and balance sheet by definition must balance. So your assets should equal your liabilities plus your owner’s equity. That should be balanced. The balance sheet differing from the profit and loss. The balance sheet is a company snapshot of like the financial health and while the profit and loss does the same thing. The balance sheet is more of a cumulative snapshot. So this will carry over from year to year, providing you a great look into how your business is progressing or not. And so I think it’s really important because you want your business to be successful long term.
Speaker 1 (05:26):
So while the profit and loss is very important, the balance sheet is in my mind, even a little more important because you’re going to see how your business is growing and progressing throughout its whole life span from day one, let’s break down the balance sheet. So you have a better understanding. So assets go on the balance sheet and asset is any sort of cash or inventory, any sort of equipment or buildings that you may possess that you own. These are all things that make your business more valuable, right. Okay. Next is liabilities. Liabilities would be any like bills that are, that you owe. So, um, your accounts payable, um, it would also be any loans or debt that you’ve may have acquired for your business. And, um, then that leaves equity and equity is essentially your stake in your company. Um, so it’s, it’s kind of the leftover piece assets minus liabilities is like the value of the company to you.
Speaker 1 (06:39):
And so equity is very important, but I don’t want you to get caught up on that because it can also be a very complicated matter. So I think for you, you guys, the most important thing to make sure that you have accounted for are all of your assets and all of your liabilities. And then, um, if things aren’t quite balancing out, right, I do recommend, uh, bringing this to your tax professional, especially at first, just to help you get balanced. Because like I said, if you’ve already been in business and you have not been doing your balance sheet, your equity could be a little off and it, I would definitely recommend getting a little help just to get that squared away. And then as you progress, you should be able to track it and keep it up to date. All right, the profit and loss, which I’m assuming most of you have at least glanced at some sort of profit and loss statement, whether you’re tracking it in a spreadsheet or using an accounting software, profit and loss is going to show your income and it’s going to have all your expenses and the income minus expenses is going to give you either a net profit or loss.
Speaker 1 (07:56):
Okay. In the most basic terms, that is what is going to be on there at this point. And so the profit and loss it, and how it differs from the balance sheet, the profit and loss is just for your calendar or fiscal year. So once your business year is over that net profit or loss is going to roll into your balance sheet and then you start new. So I’m hoping by me telling you that you can see the importance of the balance sheet because every year your net profit or loss rolls into the equity section of your balance sheet. So if you haven’t been doing the balance sheet and you’ve been in business, this is why I say you’re going to need help, because you’re going to have to account for some of the things that have happened previously. Okay. Don’t let it stress you out, get all your assets and liabilities in order and then seek help.
Speaker 1 (08:49):
Okay. So back to the profit and loss. So the profit and loss is super important when you’re in current calendar or fiscal year, right? Because you want to see how your business is doing. Are you making a profit or are you at a loss right now? What can you do that is different? How can you bring in more revenue? Or how can you get rid of some of your expenses to up your profit? Right? So it’s super important that you are paying attention to this profit and loss at least once a month, so that you can see where you need to make changes and decisions in your business. Now also keep in mind that you’re going to have good months and you’re going to have bad months. That is for every business. So don’t automatically assume that if you have one bad month, that you need to make all these drastic changes, just get in the habit of looking once a month at your profit and loss so that you can be more aware of what is happening in your business.
Speaker 1 (09:48):
And you can make the decisions that you need to, to grow over time. When you take the time to look at your profit and loss, I want you to also check on your balance sheet, make a habit once a month, to look at both statements. Once again, the balance sheet is cumulative. So it’s going to give you a great picture of how you are progressing in your business from day one. Both are important, both are important to you. Both are important for your success in the future. And while you may not have anyone wanting to look at the balance sheet right now, someday, you may, as you grow, so take care of it today, profit and loss. You absolutely have to have this for your tax return. So super important that you stay current and up to date on your profit and loss so that when it comes to tax time, you are ready to just hand it over.
Speaker 1 (10:46):
Okay. So your takeaway, just to reiterate, I want you as an entrepreneur to start to get a better understanding of your balance sheet and your profit and loss. These two reports will be important for you as you move forward in your business. So dedicate at least one day per month to review them. This also means that you have to stay up on your bookkeeping, okay? Your reports will not be correct if you have not input all of the transactions. So stay current in your bookkeeping. Review these two financial reports. Someday. There may be other reports that you need to go to, but for today, I want you to just focus on these and I really hope that they will help you in your business. I hope that this podcast was helpful in understanding these a little bit more. If you have further questions or need some help, please feel free to reach out to me.
Speaker 2 (11:54):
I’m over on Instagram at Stephanie Provenza, or you can come to our Facebook community, business minded mama and ask her questions there, or send me a private message. If you don’t want it to be out in the public, I will see you all next week. Did you like what you heard on today’s podcast or do you know a business minded mama that could benefit from hearing this, take a screenshot and share this with your community. And don’t forget to give me a review, want to chat more by me on Facebook and the business minded momma Facebook page, or on Instagram at misses and SIS or through my website, www dot business-minded moma.com.