May 2, 2022
Accounting is one of those things that scares pretty much anyone who hasn’t studied to do it professionally. The invoicing, forecasting, and reporting processes seem quite mysterious if you’ve never done them yourself.
However, at the very heart of accounting, there’s one crucial thing: comparing the amount of money you’re making and what your worth is to the amount of money you’re spending. One way to do that is the Balance Sheet, but what is a Balance Sheet, and how can you figure out how to make a Balance Sheet if you’re not an accounting professional? Read on for some simple tips and information.
Business is a lot like dieting. When you’re dieting, you need to burn more calories than you eat to lose weight. When you’re in business, you need to make more than you spend to stay in business.
A Balance Sheet is a report that helps you see your financial position. If everything is going well, your assets and equity will exceed your liabilities. So the math itself is fairly simple.
To figure out what your business’s financial situation is right now, you need to calculate what you own and have in the bank and compare that to what you owe and have to pay to suppliers, lenders or service providers.
So everything that your business earns, owns, spends or needs to be recorded on a Balance Sheet as either a positive value or a negative one. Balance Sheets are usually generated annually, but you can prepare one at any time. When you approach a lender, they will often ask to see your Balance Sheet.
The basic equation behind a Balance Sheet is:
Assets = Liabilities + Equity
This means that your assets include things you owe money for, and once all those debts are deducted from your assets, the figure left will be your equity or ownership portion of your company. Getting to that figure is quite simple but can be time-consuming.
Here’s what you need to do:
A Balance Sheet is a quick way to see if your business is doing well or not, and it’s a very valuable accounting tool.
You can import a live Balance Sheet with LiveFlow in a few clicks:
Creating a Balance Sheet is one thing. Figuring out what it is telling you is another thing entirely.
If you’re not used to interpreting financial data, the simplest way to explain what you want your Balance Sheet to show you is that your equity is a more significant proportion of your assets than your liabilities. The smaller your equity and the larger your liabilities, the harder you will have to work to repay all those debts.
One of the reasons we are building LiveFlow and created the LiveFlow Google Sheets Add-on is that we know that accounting is a very fluid thing. You could be in reasonably good financial shape one week and in a much more precarious situation the next.
So, while you usually only need to do a Balance Sheet once a year, it’s a good idea to keep yours up to date in real-time.
LiveFlow’s Google Sheets integration lets you connect QuickBooks to Google Sheets and sync QuickBooks reports in real-time. That means that whenever your data refreshes in QuickBooks Online, it will also update your Balance Sheet in Google Sheets.
Whether you’re managing your own finances or preparing reports for a manager or the business owner, this kind of data automation lets everyone stay up to date with the company’s financial health at all times. That means that when you do start getting into trouble, where your liabilities are growing more than your assets, you can start taking appropriate action to correct the problem sooner rather than later.
Data automation is a simple option to keep your accounting reports up to date, so you always know exactly where you stand.