The Importance Of Income Statements For Your Small Business
Running a small business requires a lot of effort, time, and knowledge, and there will be certain tasks that you cannot handle yourself. One of these is the bookkeeping services of the business, but you can hire this out. Hiring a company to handle your bookkeeping tasks offers a lot of great benefits, and one of these is that they will handle creating financial statements for you.
An income statement is one of these, and here are two things to understand about income statements:
What Is It?
An income statement is a form that shows you how much money your company made during a certain period. Many companies create income statements monthly, quarterly, and yearly, and these statements contain three crucial things:
- Revenue – This represents the amount of money your business had in sales during the period.
- Expenses – All of the expenses from the period are included on the statement, and you can see a grand total as you view the document.
- Net income – The difference between the revenue and the expenses is your net income. Net income does not always include every expense though, because some expenses are added in periodically instead of monthly.
You can request this document as often as needed, and your bookkeeper will prepare it for you.
What Can You Use It For?
Income statements are great documents to use when you want to know whether your business is improving, declining, or staying about the same. To compare them, you can take two or more income statements and compare the numbers. If you want to know how your company did in the month of December compared to last December, you can compare these two months of income statements.
As you do this, you will see the differences in the revenue, expenses, and net income, and this can help you plan for the future. If you notice that your revenues were about the same, but that this year you had a lot more expenses, you may want to take some time to find out why your expenses went up so much.
This statement can help you find ways to reduce expenses and increase revenues, and it will help you understand the financial state of your business.
Bookkeeping services can prepare other financial statements for you too, including balance sheets. If you cannot handle your bookkeeping tasks on your own, you may want to consider hiring a bookkeeping service company to do this for you.
If you need help, try contacting a company with professional experience in bookkeeping services.