Therefore, in the midst of this chaotic scenario, there is a great risk of losing sight of the proposed objectives and goals set, which negatively impacts the expected results. In this context, the financial statement proves to be a great ally.
In this post, we will explain its concept in more detail, highlighting its importance, how to structure it, among other equally relevant points. Keep reading!
What is the financial balance sheet?
In general, the end of a cycle is usually marked with reflections and assessments about what has happened and, of course, what is yet to come. At the personal level, for instance, we usually do a kind of “retrospective” on our ups and downs, weighing against each other what we feel and do.
In the business context, it is not much different. During this period, as a rule, management analyzes the initiatives that generated losses and profits and draws up a plan for adopting a wiser stance in the following year — hence the importance of the balance sheet.
In simple terms, this accounting statement takes into account a specific period of time and compares budgetary expenses and revenues with extra-budgetary payments and receipts, combining them with cash balances from the previous year that will be transferred to the next. In other words, it is a kind of “general mapping” of a business.
How to differentiate it from the budget and asset balance sheet?
Although the terms are used almost as synonyms, the fact remains that there are certain differences between the two. In general, a balance sheet may be termed as a report prepared as proof or demonstration of the organization’s financial situation.
In this sense, the financial balance sheet — which we are addressing — enables the analysis of the financial result within a stipulated period of time (for example, one year) and presents the balance that will be present in the next fiscal year, which should preferably be positive.
The balance sheet, on the other hand, details the situation of the assets, with the recording of offsetting accounts, obligations (which constitute the permanent liabilities/financial liabilities) and assets and rights (which constitute the permanent assets/financial assets). The budget balance shows the legally foreseen budgetary expenses and revenues in comparison with those actually realized.
From this last comparison, it becomes possible to identify whether the company’s budget is in balance, in deficit or in surplus.
What is the importance of the financial balance sheet?
Regardless of a company’s segment of activity, as we have seen, the financial balance sheet serves mainly for the constant monitoring of its finances, representing a tool that enables the general analysis of the financial situation in a given period of time.
Therefore, its relevance lies especially in signaling the actions that can be implemented and the aspects that require caution during the structuring of the planning. In addition, this instrument allows:
- that the decisions taken are better informed;
- that financial behavior is detailed, including making it possible to analyze it by period;
- that all tax planning is better guided;
- that professionals in the area understand more easily the “status” of the financial journey;
- that strategic planning is adequately structured.
In other words, the financial balance sheet is essential so that management can analyze the whole more precisely and, from there, outline strategies based on constantly updated data.
How to structure it?
Some actions are essential for the proper development of the financial balance sheet, so that all information related to the company’s finances is considered, maintaining the appropriate equivalence with the reality of the business. Below, we list a kind of step-by-step guide that will guide you in this process.
Determine the period that will be taken into account
Defining the analysis period for preparing the accounting statement is the starting point for its structuring. In general, companies prepare a financial statement every twelve months, but it is possible to analyze a shorter period of time — in fact, it is best to perform it monthly.
Account for assets and liabilities
An essential step in structuring the financial balance sheet, accounting for assets and liabilities must be done considering two categories: current and non-current. In this way, total and individual analyses will become less complex.
Calculate net worth
To know the available capital, it is necessary to calculate the company’s net worth — which refers to the positive difference between the amount of liabilities and assets, representing strategic information —. This will make it possible to develop a plan that is appropriate to the current context of the business and, therefore, truly interesting for the objectives that are desired to be achieved.
Make a comparison between liabilities, assets and equity
When structuring the financial statement, it is important that all assets are listed in one column and that all liabilities and equity are arranged in another. In this case, grouping the amounts into accounts and according to liquidity status makes analysis easier.
Count on technology as an ally
Technology is increasingly proving to be indispensable for better management of organizational processes . Therefore, having a business management solution that optimizes the most bureaucratic activities is essential, especially to preserve the quality of work and reduce the time needed for its execution.
In this case, having a customizable and integratable ERP will make all the difference — beyond the financial sector, too — enabling the structuring of assertive accounting statements and the integration of important information and data.