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No matter what stage your business is at, your balance sheet is an important tool to prepare you for what's to come.
By regularly forecasting your business balance sheet, you will have a clearer understanding of what you’re likely to own or owe by a certain date. This means you’ll be better prepared to make immediate and future business decisions when required.
Get started with your balance sheet
Use our Balance sheet template (xlsx 1.5MB) to start getting a handle on your business finances.
By filling out your balance sheet, you can better understand what you own or owe at a specific date, allowing you to plan for future business decisions.
What’s a balance sheet?
A balance sheet is a snapshot of everything that the business owns and owes at a particular point in time.
It includes:
- Assets: Everything that the business owns (i.e. a resource used to make money in your business).
- Liabilities: Everything that the business owes to third parties, such as banks, suppliers or employees (i.e. debts owed to other people).
- Equity: Everything that would be left over if all of the assets were sold and all of the liabilities were repaid, assuming no other payments are required.
In a balance sheet, the total assets should equal the total liabilities and equity. When you’re making projections, it’s important that the balance sheet equals in this way.
If your sheet isn’t balanced, it usually means that you’ve missed something or there’s an error.
Why use a balance sheet?
Here are some reasons why it’s important to keep a handle on your business finances:
- Be ready for the future. A balance sheet is important for the management of a business. Kept updated, it can help identify any existing issues as well as anticipate future problems, allowing you to create a necessary business plan. For example, you can check your current debt position and compare it with the industry benchmark to see where you could make some changes.
- Have a detailed analysis of your company’s financial health. If you combine an updated balance sheet with your latest revenue and cash flow statements, you can put your best financial foot forward when expanding, securing lending or growing your business.
- Put yourself in a good position to borrow funds. Banks use a balance sheet as a tool to give them visibility of your business’ current financial position, including your current assets and liabilities, to help them assess your capacity to repay a loan
- Make an impression with potential investors. Showing your current assets, liabilities and financial position to potential investors means they can use this information to consider the future growth potential of your business.
Next steps
For an idea of what position your balance sheet will be in by the end of the year, download our Balance sheet template (xlsx 1.5MB) to estimate your assets and liabilities at a future date.
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