Being in Balance Through Understanding Your Financials


A survey by Desjardins Financial Security showed that money is the main cause of stress outside of work. Nearly half of the respondents cited money issues as their top stressor. I often hear from clients how frustrated they are with their current financial position. They feel lost and they are not sure how to create a plan to track their cash flow. This can create fear and stress, which in turn makes it difficult to have balance in the workplace.

Before you can determine your current financial position and set realistic goals you must understand your current financial situation. You also need tools to help track your progress. Timely and accurate financials are the first step to gaining control. They help you to identify potential problems and help you to make better-informed decisions. Financials also help you to set goals so that you can project your cash flow, allowing you to be proactive with your finances rather than reacting to what already took place. Signature Analytics can provide the financial analysis services you need to better understand your financials and create an action plan to help create balance.

Selecting the Right Accounting Reports

There are two accounting reports that are essential to monitoring your financial position.

  1. The balance sheet describes your financial position—the assets you hold, less the debts you owe, equal your net worth (general level of wealth)—at a given point in time. This planning tool helps you track the progress you’re making in building up your assets and reducing your debt.
  2. In contrast, the income and expense statement measures financial performance over time. It tracks income earned, as well as expenses made, during a given period (usually a month or a year). You use this tool to compare your actual expenses and purchases with the amounts budgeted and then make the necessary changes to correct discrepancies between the actual and budgeted amounts.

The Balance Sheet

A balance sheet has three parts that, taken together, summarize your financial picture:

  • Assets: What you own
  • Liabilities, or debts: What you owe
  • Net worth: The difference between your assets and liabilities

The accounting relationship among these three categories is called the balance sheet equation and is expressed as follows:

Total assets = Total liabilities + Net worth (or) Net worth = Total assets + Total liabilities

The Income and Expense Statement

The income and expense statement, otherwise known as the profit and loss statement, has three major parts that help you to determine the cash surplus (or deficit) or your business.

  • Cash in-flow = revenue
  • Cash out-flow = expenses
  • Cash surplus (or deficit) = net profit (or loss)

A cash surplus (or deficit), otherwise known as the net profit of loss, is merely the difference between income and expenses. The statement is prepared on either a cash or accrual basis.

  • On a cash basis, the only activity reported are transactions involving actual cash receipts or actual cash outlays. The term cash is used in this case to include not only coin and currency but also checks and debit card transactions drawn against checking and certain types of savings accounts.
  • On an accrual basis, you match revenue with expense regardless when the cash may or may not be collected. If you sell a product to a customer and he doesn’t pay you for 30 days, the sale is recorded in the books on the day that you made the sale. When the money comes in the “accounts receivable” is then turned into cash. The same with expenses: if you incur an expense on one month but don’t pay until the next month, the expense will be recognized in the month in which you incurred the expense.

We Can Help

Signature Analytics can provide outsourced accounting services to keep your activity up-to-date so that you can have accurate monthly financials. We can help project your cash to see deficits before they happen and to create a budget to project for these shortfalls. Knowing about this ahead of time can assist you to make different choices, such as reducing expenses, increasing revenue – setting sales goals to track your progress, and finding lending resources such as a line of credit or business loan. The Signature Analytics team can help to facilitate solutions relating to business problems to increase productivity and profitability, including setting up job costing, track labor costs, track revenue items, and overhead. Although we cannot eliminate all stress, getting your finances under control is a great first step in bringing balance back into your business. Contact us today!