Finance & Accounting Tools

Financial Statements

Financial statements are the primary result of accounting. The income statement, balance sheet and statement of cash flows are three financial reports small business owners can use to determine how well their business is operating. Business owners may be able to use basic financial ratios to break down their financial statements and compare the ratios to a leading competitor or the industry standard. These ratios often indicate a how well the company generates profit through sales, the use of debt to finance business assets, the long-term cash flow potential from current operations and the small businesses ability to collect outstanding receivables owed by clients.

Cost Allocation Analysis

Cost allocation analysis is a management accounting function used to determine how a small business allocates specific costs to its goods or services. Costs commonly allocated to goods and services include raw materials, employee labor and overhead. Small business owners need to ensure they are accurately allocating costs to products since the sale of goods or services to consumers is the primary way small businesses recoup business costs. Small businesses may also review the cost allocation process to determine if their billing clients for everything involved in completing a job.

Budgets & Forecasting

Budgets represent a written guideline for how much money small business owners expect to spend on various economic resources or business functions. Forecasting is a detailed and sometimes complex accounting tool small businesses can use to determine potential sales in the current economic market. Forecasting may be completed by reviewing the small business’ previous sales history, target market or demographic information released by the Small Business Administration (SBA) or reviewing how many competitors are in the current business industry.

A SHORT BRIEF

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