How to analyse your financial statements and identify errors in 5 minutes
Admit it. Every time you have to analyse your financial statements, you get that sinking feeling.
But, who can blame you, given the importance of such a task.
If your trial balance has errors, your financial statements will also be incorrect. And you use your balance sheet to declare your taxes to SARS annually - so it must be correct.
But going through your financials can take you hours, if not days. But it doesn't have to.
Here's how to analyse your financials in 5 minutes.
Don't spend hours going through your financial statements, here are 5 things you can quickly check in minutes… one small error could cost your company thousands if it goes unnoticed.
Check that the assets on your balance sheet (especially your inventory and receivables) will realise the values reflected in your financial statements.
Are your assets are fairly stated? If so, are you comfortable that all your liabilities have been raised and the corresponding changes to the income statement have been processed?
Is your cash flow positive? If 'yes' then ensure your bank statement balance agrees with your cash book records. There shouldn't be any major reconciling items.
You should regularly review your working capital, inventory receivable and cash less amounts owing to outsiders. This will help ensure your business can meet its short term obligations.
Always ask questions. Be pedantic…that way more problems will be identified early. Don't be shy to ask why 'income is down' or why 'expenses are up.
This is great if you've already prepared your financials and need to check for errors. But what if you need to start at the beginning and have to compile 100% legally compliant income statements and balance sheets?
In All About Financial Statements: Your complete guide to compiling 100% legally compliant income statements and balance sheets
you'll get the essential information you need to prepare and cross-check your company's accounting records.
The final result – you'll have a trial balance, income statement and balance sheet prepared professionally, fairly quickly and with minimum energy!
Click here to find out more
Managing Editor: The Practical Tax Loose Leaf
Do you have problems in drawing up an income statement and balance sheets? Well I have one tool for your, it's your complete guide to compiling 100% legally compliant income statements and balance sheets