Balance Sheet

A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity of a business for a specific period. It is important for businesses to keep track of their corporate balance sheet because it can provide insights into their financial health. Accounting teams can use balance sheets to forecast future performance and make decisions about how to grow the business.

What Is a Balance Sheet Forecast?

This is an estimate of what the balance sheet might look like at a future period. In some cases, accountants attempt to predict all aspects of the balance sheet. However, more often than not, the main concerns are the balance sheet assets and liabilities. Managers can then use this information to seize opportunities that have a direct effect on cash flow.

What Is an Accounts Receivable Balance Sheet?

This statement that shows the amount of money owed by a company’s customers. It gives direct insight into the account balance and the cash flow health of a business. The financial controller uses this sheet to make decisions about how to improve the collections process.

Here are some actions a financial controller might take after reviewing an AR balance sheet:

Set new credit limits for customers.
Determine whether to offer discounts for early payment.
Decide when to write off an account as a bad debt.
Expand the accounts receivables team.
Revise communications and schedules used for collections.
Leverage software to automate the accounts receivable process and boost cash flow.

What Are Doubtful Debts in Balance Sheet?

Doubtful debts are those that a company may not be able to collect on. When doubtful debts are included in the balance sheet, it gives a more accurate picture of the company’s financial health. Like the AR balance sheet, this also provides insight the financial controller can use to improve collections.

What Is an Example of a Good Accounting Balance Sheet Format?

There is no one-size-fits-all balance sheet format. Some companies use extremely complicated tables. This is especially likely when the company generates multiple streams of income. Tesla has one of the simplest.

Tesla Balance Sheet for Period Ending 12/31/2021

Credit: Yahoo Finance

Do All Companies Need To Create Balance Sheets?

If you are a small business owner, a simplified accounting system might have worked well for you, so far. This might show only your revenue and expenses. In some instances, this could be all you need to manage your finances and even file your taxes. So, do you really need to create formal balance sheets?

The answer is maybe. If you need to get a business loan or bring on investors, they will likely want to see one. The good news is that you can sometimes create a balance sheet with the click of a button. If you use a program to manage your bookkeeping, it usually has an option to generate one as a report. The program will need full access to your finances to create an accurate statement.

How Can Accounts Receivable Software Improve Your Balance Sheet?

Software automates the AR process, which helps you get paid faster. It also helps you keep track of customer payments, invoices, and credits. When all this information is in one place, it makes it easy to generate a balance sheet as a report. You can quickly see how much money each customer owes. This information can help you make decisions about which customers to focus on and how to structure your payment terms.

Would you like to leverage these and other benefits for your business? Book your free Gaviti demo to get started.