Having all financials well documented and prepped up will help you along many hurdles in business. It will give you an accurate view of how your business is thriving, and help you get the best deals in financing. Take a look at the following required documents that you should have, which can be helpful when you’re getting external funding or investments.
1. Profit and Loss Statement
Also known as an Income Statement, this document is the most important thing that you should have in your records. A Profit and Loss Statement will tell you where your revenue comes from. It will also show where you spend your money on and what are the most profitable aspects of your business.
The income statement will reveal your profits in different sources and how much you spend for recurring expenses. This will be essential in making projections for your costs and profits, along with knowing performance trends in different time periods. You can use your income statement to compare the sales or profits you have last year.
You have to check your income statement at least once a month. You might see something unexpected from the actual data you have at certain periods.
If you’re going to apply for a business loan, an income statement will be an essential part of your Business Financial Statement.
2. Cash Flow Statement
A cash flow statement involves 3 parts. These are the following:
Operating Activities: This section summarises the amount of money flowing in and out of your business. These include sales earned and expenses incurred in daily operations. Any changes that revolve around accounts receivable, inventory, or actual business cash are reflected in the Operating Activities section. You’ll see how much your business is spending on income tax payments, employee wages, interest payments, and money spent on vendors or suppliers.
Investing Activities: The second part of the cash flow statement features investing activities such as buying and selling of business assets.
Financing Activities: This shows how much money is flowing in and out of your business, which may involve debt or equity activities.
3. Balance Sheet
A Balance Sheet is the third document that will make up your Business Financial Statement. It tells you how much your business has and owes. It will mainly show the following:
Assets: These show how much wealth your business has. It includes bank accounts, property, equipment, computers, and etc.
Liabilities: These include what your business owes, such as credit cards, small business loans, overdrafts, or other debts.
Adding your assets and liabilities gives you the total equity of your business. The goal is to have more assets than liabilities, and make sure that you’ll grow your income so that the difference between the two increases.
You can use your balance sheet to compare short-term liabilities and short-term assets. It will help you determine if you have enough liquid assets (or assets that can be easily converted to cash) to settle upcoming payments.
4. Accounts Receivable Ageing
A lot of business revolve around sending invoices to customers. Businesses who use invoices have to make sure that customers pay on time so that they can cover business expenses.
An Accounts Receivable Ageing Report shows the time frame from when the invoice was sent to when it was paid by the customer. You can identify which customers pay on time, who frequently pays late, or how much money your customers owe you.
In case that your customers pay late, you can opt for Invoice Financing. You submit the invoices to a financing house, and they’ll give you payment in advance. The unpaid invoice serves as security for the loan. The lender advances you a percentage of the total invoice amount – usually 70% to 90% of it. The lender may also charge a weekly fee, because they will take care of collecting the invoice. You can use the advance to cover business expenses. You get the funds once the invoice has been paid by the customer, minus fees and charges.
Get Your Documents Updated to Avail of the Best Financing
Get a good overview of your business financial documents first before applying for a small business loan. You’ll be more prepared as to what a lender would ask or require when you have all your documents well updated. You’ll also know what funding options are available for you once you get a good grasp on the financial health of your business.
Here at Bizzloans, we can help you take away all the hassle in applying for business loans. We match you with the right lender and financial product for your business needs. Comparing lenders won’t affect your credit score, and you can get funding within 24 hours. Get a free quote below to start you way to smart financing.
Russel needed an injection of cash to pay his employees while he was waiting to be paid. We were able to have the funds in his account 48 hours after he first applied.
Max needed funds to renovate his restaurant in NSW. He didn’t want to put his property on the line to secure a loan with the bank. We were able to get him over 100k without offering any security.
Anna needed funds to renovate her practice in Adelaide. We were able to get her the funds she needed with only providing her business bank statements and photo ID.