Balance Sheet Insight for SME Growth© | by Juan Ojeda Jr., MBA, M.Acc.

As your business grows, especially once you approach or surpass $250,000 in gross revenue, it's time to get familiar with one of the most important tools for tax planning, funding, and compliance: the Balance Sheet. Many small business owners don't realize when or why they need one until it's too late - this guide will help you stay ahead.

What Is a Balance Sheet?
A Balance Sheet provides a snapshot of your business's financial position by showing what you own (assets), what you owe (liabilities), and what's left over for you as the owner (equity).  

When to Create One: 4 Trigger Points

1. Gross Sales Hit or Exceed $250,000:
   Your tax professional will likely require a balance sheet for accurate corporate tax filings.

1. Seeking Financing or Business Credit:
   Lenders use balance sheets to assess your company's financial health and lending risk.

1. Preparing to Sell or Transfer Ownership:
   Prospective buyers will want a clear financial picture before committing.

1. Applying for Large Contracts or Licenses: Government contracts or certifications often demand financial statements as part of eligibility.

How to Analyze a Balance Sheet, FACT SHEETS

Cash & Equivalents: The more, the better; it gives your business flexibility.
Accounts Receivable: Less is better; aim to get paid upfront.
Inventory: Minimal inventory is ideal to avoid tying up cash.
Goodwill: Indicates past acquisitions; ideally, your growth is organic.
Largest Asset: If it's cash, you're in a strong position. 

LIABILITIES

Debt: Low debt means more freedom and fewer obligations.
Deferred Revenue: A great sign, being paid before delivering service improves cash flow.
Largest Liability: Should be smaller than your cash balance. 

EQUITY

Preferred Stock: Avoid issuing unless absolutely necessary.
Retained Earnings: Positive and growing retained earnings show long-term viability.
Treasury Stock: Indicates reinvestment into your company.
Funding Source: Strong businesses grow using profits, not loans. 

4 Ratios to Know

• Quick Ratio: (Cash + AR) ÷ Current Liabilities
• Current Ratio: Current Assets ÷ Current Liabilities
• Debt-to-Equity: Total Liabilities ÷ Equity
• Goodwill-to-Assets: Goodwill ÷ Total Assets

Having a balance sheet isn't just about tax season; it's a tool for understanding and steering your business with confidence. 

Stay aware. Ask questions. Know the difference.

Give us a call today at (888) 203-4442 to better help you and your business entity to Regulate Money, Shelter Money &pay little to NO TAXES®