The Importance of Your Balance Sheet

Hi there. I'm Liz Jarvis, and this is Better Business Insights. Today we're going to be talking about why it's important to read your balance sheet and reconcile the items on it.
If you're a very small business, you might have not much at all on your balance sheet. But you're at least likely to have your bank and you need to do a bank reconciliation between your bank account and your bank statement, what the bank thinks you have in your account.
And if you have an employee, you'll be withholding some, pay as you go withholding tax. That should be sitting there on your balance sheet, showing that it's waiting to be paid to the tax office at the end of a month or a quarter or a year.
You might have some superannuation sitting on your balance sheet, waiting to be sent off. Perhaps you have customers that don't pay immediately. That would mean you have debtors or sometimes it's called accounts receivable. There would be a balance there for those. And you need to reconcile that with the list of what people owe you.
They should agree. If they don't, you need to go looking for why they don't. Likewise, with accounts payable or creditors, there will be a balance of what you owe to other people and your list from your, what we call sub-ledger, your accounts payable or creditors ledger, depending on what software you're using- should be able to add up to what's there.
If you are withholding GST, if you're registered for GST, that's also there, showing the amount that you have yet to settle with the tax office.
Now, all of these numbers can get really messed up. Particularly if so many businesses, things will go off the rails, occasionally, let's face it, and you might get behind.
And those balances might grow bigger and bigger and get harder to reconcile. But the truth is, when there's something on your balance sheet, you need to know what it is and what it's made up of. So, I encourage you to read your balance sheet, to reach out to someone else if you need to - to explain to you what the numbers are. And to prove or reconcile, to prove those numbers with the other information in the accounting system.
I hope that's helped. There's a lot more to it than meets the eye. But as a Business Owner, you really need to be sure that those things on the balance sheet are correct. Someone could be ripping you off, or you might not realise just what you owe. It's very important that your balance sheet is reviewed on a very regular basis.
Don't let that scare you. Reach out if you need help and have a fantastic day. See you on our next episode.

Your Balance sheet is an important source of information for the business owner and it may in fact be quite incorrect. If it's incorrect so is the Profit you are reporting. This video gives a quick overview of the things you should expect to find on a balance sheet and the importance of checking the details of the balance shown for those things. If you need help with getting your balance sheet in shape - reach out to us. No need to change accountants or bookkeepers because we are here to Educate, Support and Guide business owners everywhere.

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