Things To Look For In Making a Balance Sheet

By Jason A Smail | Business and Finance

Jun 23

When you look at the balance sheet, you should look for an unreasonable or unreasonable balance. A balance sheet is a picture of your business today. You will get a quick snapshot of what is happening inside your company. Aside from that, if you also need the help from a licensed bookkeeper, we recommend you call Richard Darcy Gold Coast Bookkeepers.

Here are some important caveats that can be identified if the financial statement numbers in your balance sheet are incorrect:

Negative Balance

You might find a negative balance on the asset. What does the balance reveal? Did you sell the assets and delete them from the book but forgot to reverse the depreciation? Investigate immediately.

Incorrect Payment Receipt Post

If your staff accepts payments from clients and puts them in the wrong account, your balance sheet will be chaotic. Your financial statements will show a negative balance on one of the client accounts. On the other hand, clients who have already paid still show unpaid bills. Repair it immediately.

The ratio of Debt to Income Increases

If you have a number of “other expenses” items in large numbers, you may see a downward trend in profits that sometimes takes place gradually in the long run. This can lead to an increase in your debt to income ratio because your funds are misplaced. On the other hand, this condition can also be caused because your business is having a hard time. In this case, the financial statements may not be wrong, but clearly provide a warning that you must immediately deal with. In both conditions, you must know why this is happening, analyze the root cause, and take action.

Poor Age Accounts Receivable Report

Often the staff in a company are not disciplined in billing so many of the accounts receivable are old because they have passed the payment term. The bad impact is the occurrence of a Cash Gap where the company must spend capital in the beginning for all purchases before getting payment. As a result, companies have to borrow funds which of course adds to the interest expense. If this happens with you, of course, it affects the erosion of profits due to interest costs.

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