If you own, run, or manage a business, you likely know how important it is to keep track of your venture’s money. This process may seem simple – just know what you’ve earned, what you’ve spent, and call it a day, right? – but it’s actually a bit more complicated than you might expect. Understanding your company’s fiscal situation requires knowing the exact values of your cash, liabilities, assets, profits, and more. In addition, you need to comprehend how they relate to each other – for example, you should be able to easily, quickly answer questions like “how much usable cash have your liabilities provided you with?” or “how much was that asset you purchased worth?”
If you know exactly how much money is coming into and leaving your company, you should be able to subtract your liabilities from your assets to calculate your net profits. When these figures add up appropriately, your finances are called “balanced.” Thus, the reporting you use to monitor these fiscal metrics is called a balance sheet. The Get Excel Help team can aid you in more adeptly generating these types of reports so you can keep your books balanced.
What is a Balance Sheet?
Above, we explained that a balance sheet describes your assets, liabilities, and profits, but what exactly does this entail? Investopedia explains: “the balance sheet adheres to the following equation, where assets one side, and liabilities plus shareholders’ equity [investors’ profits] on the other, balance out: Assets = Liabilities + Shareholders’ Equity.” These are usually put in two large columns: one describing assets, on the left, and the other listing both liabilities and equity, on the right. A balance sheet may also include three separate columns – one for each category. Cliqvid provides a visual demonstration of the basic balance sheet structure.
Balance sheets don’t just include raw, total figures, of course. They describe the different sources and types of assets, liabilities, and equity. Most balance sheets also classify these numbers based on whether or not they are short-term (e.g. a temporary loan) or long-term (e.g. anticipated dividends from a years-long investment). For example, assets could include everything from “cash and cash equivalents,” to “intangible assets…such as intellectual property and goodwill,” as per Investopedia. Similarly, liabilities might include “wages payable” for workers, “interest payable,” and “pension fund liability,” to name a few. The shareholder equity, or profits, discussed might differentiate between disparate kinds of stock. These details help make balance sheets even more informative and therefore useful.
Why Balance Sheets Benefit Your Business
Sometimes, these types of reports feel like nothing more than an exercise in bureaucracy, something you know you “have” to put together to satisfy your accounting department but that offers no true value for your company. However, when they’re created and evaluated thoughtfully, balance sheets can be a veritable boon to your business.
First of all, the act of even creating a balance sheet can call your attention to areas of your company’s finances that may require immediate attention. Part of compiling these documents is ensuring, ideally, that everything evens out – your liabilities and equity should not outweigh your assets, nor vice versa. If your balance sheet is imbalanced, you can find out why and correct this problem. Spotting fiscal fiascos before they cause more serious consequences can save your company time, money, and hassle. It may even prevent your venture from failing, in very dire circumstances.
Second, balance sheets can be important tools for business strategy. Seeing all these numbers laid out before you could inspire ideas about how you can optimize your assets, limit your liabilities, and expand your equity.
Third, balance sheets, along with P&L or income statements and statements of cash flow, are very important for investor relations. These reports keep your shareholders in the loop on your financial situation so that they can provide their suggestions, ask questions about their investments, make any adjustments they’d like, and, ultimately, trust your business with their money.
These are just a few ways balance sheets can help you better manage your operations; there are virtually infinite advantages to making and having these documents at your disposal. They can be of even greater worth to your company when made with sophisticated software such as Excel.
Creating a Balance Sheet the Old-Fashioned Way
Do you remember back in the day when you had to balance your own checkbooks? Imagine that hassle, but times 100, and you’ll envision the experience of manually creating a balance sheet. You’d have to dig up all your data, note exactly where each figure came from, sort it into the appropriate sections, and calculate the balance. This process would be not only monotonous, but highly error-prone. You’d be just one slip of the finger on the calculator, one forgotten asset, one lost receipt away from an incorrect report, which is even worse than useless.
Even with the advent of modern technology, corralling all the numbers you need, categorizing them, and inputting the correct formulas to ensure your spreadsheets do their jobs can be quite a nuisance. While digital records and files eliminate some of the possibility for mistakes, there is still a risk that you’ll forget to port in the data from a given account or mix up your equity numbers.
In short, struggling to create a balance sheet yourself is a tedious, dangerous, and unrewarding task. If it was the only way to write up a balance sheet, it would be worthwhile. Fortunately, there’s a better way to go about this process.
Boosting Your Balance Sheets with Excel
Chances are, you already store most or all of your accounting information in Excel. With the right procedures, you can tell Excel to pull every piece of information you need for a balance sheet automatically and have the computer generate an accurate, coherent report for you. Users so often leverage Excel for this purpose that Microsoft Office even created balance sheet templates. Furthermore, the business department of the Australian government uses (and publicizes) Excel documents as model balance sheets.
Going above and beyond the excellent but limited Excel template functionality for balance sheets, the Get Excel Help team can consult with you about your precise preferences, custom-tailor a programming solution for your personalized balance sheets, and provide advanced instruction for your team, ensuring that you understand how to make and use balance sheets far into your financial future.
Are You Ready for Better Balance Sheets?
Our esteemed Excel consultants, programmers, and trainers are available to assist you! Contact Get Excel Help today to learn more about this and other superb services.