{Photo by flowers & machinery}
Another tool that a business owner can use to measure the success of their business is the Balance Sheet. The Balance Sheet is also the final financial projection required for the Business Plan Challenge! Like the Income Statement, the Balance Sheet is based on the Cash Flow Statement and presents the financial picture of a business in a different way.
As obvious as it may sound, the Balance Sheet is intended to show how "balanced" your business really is. Its based on a simple equation that you may have seen before:
Total Assets = Total Liabilities + Owner's Equity
What does this really mean? Well, an asset is anything with monetary value that is owned by the business. A Liability is a debt or obligation of the business. Owner's Equity is whatever value is left after the debts are paid. In short, after paying off the business' debt, the only value that remains for the owner is the balance of the assets. The three must balance.
We've found another template for you to use to create your Balance Sheet. You can download it here from SCORE. The template has 2 columns: Beginning and End. We recommend amending your template to reflect the traditional 3 column format. The first column would be Opening or Day One of your business, then a column for the End of Year One, and finally the End of Year Two.
The template is very straight forward and the information comes from your Income Statement or Cash Flow Projections. One important note, when you complete your spreadsheet the Total Assets line must equal the Total Liabilities and Equity!
That is it for the Financial Statements! Next week we will talk about the Executive Summary and after that our Challenge and your Business Plan will be complete.
Lili Nedved and Henry Sinha are opening a brick and mortar retail store
in Vancouver, Canada. With lots experience staying up late and working
on Lili’s handbag business, iglubu,
Henry was recently promoted from an Electrical Engineer to Director of
Fabric Organization. Lili hopes her Finance degree will give her the
edge in the competition for Employee of the Month.
