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How to Create Simple and Effective Financial Statements?

Financial statement is an important part of business plan and numbers are something that many people would understand. Financial statement is something that can allow us bridge the gap. You need to make sure that you are able to prepare financial statement, then present it properly. Creating financial statement require expert knowledge on finance, accounting, taxes and other related factors. You need to be able to present numbers correctly. If your financial statement is not convincing enough, then you can’t expect investors to give you money. If you are not sure that you are able to create proper financial statement, then it is a good idea to get helps early on. Of course, accountants and CPA won’t do this for nothing, so you should agree to pay some amount of money for their service. Financial statement is essential if you want to build financial model or start a business. You should make sure that you are working with someone who understands about building proper financial statement. Proper financial statement could also depend on the investors you are working with. As an example, if you are working with bankers, you should know that they put extra weight on factors like assets values, collaterals and liquidity. If you seek to get fund from venture capitalists, then they would be more interested in knowing whether your business will be able to grow quickly. It could be a good idea to have different versions of financial statement. Each may focus more on measures and numbers based on the type of investors that you are working with.

If you have detailed financial details, you should save them for the due diligence stage and appendix. You should check what numbers that your investors are more interested to see. Financial measures should make sense and they need to fully support your overall strategies. It is a good idea to use tables and graphs more easily. Graphs should be quite essential for presenting comparisons and trends. When you use them, try to make them uncluttered and simple. You need to be sure that axis tabs, lines, headings and other factors are perfectly legible and clear. Because numbers are critical elements of your financial statements, you should check things like typos. Wrong values in your financial statement could instantly dissolve your credibility. If you do this, investors may lose their confidence in you. You should use correct versions and models of your financial plan. Financial statement should tell investors and lenders how you want to use the money. As an example, the money you borrow can be used to pay expenses, fees and debts. It can also be used to buy assets and existing businesses that support your current operation. There are fundamental elements that need to be included in the financial statement, such as cash flow, balance sheet and income statement. In the end, your financial statement should match the generally accepted accounting principles. Because you may need to release multiple financial statements regularly, you should have a good financial model that can be used consistently. Your projected results should change as business assumptions change.

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