As an entrepreneur, you need to understand how to utilize your resources properly. You should take a smart approach to how you invest your time and money so that you achieve an optimal return on investment (ROI). On this account, you should closely monitor your finances to ensure their accuracy and accountability.
Luckily, the development of the business world has simplified the accounting process. You can now easily access records outlining your business’s financial ventures. This article will give you a comparison between two such documents, the financial and bank statements, and how you can benefit from them. Read on to learn more.
Table of Contents
What’s A Financial Statement?
By definition, a financial statement is a written record that gives details of your company’s business activities and financial situation. The three main financial statements include:
- Balance sheet: A financial statement giving details of your company’s assets, liabilities, and shareholder equity.
- Income statement: A document presenting your company’s income and expenditures. It enables you to determine the profits or losses that your company is facing over a certain period.
- Cash flow statement: A financial statement summarizing the amount of incoming and outgoing cash and cash equivalents—such as treasury bills and commercial paper.
What’s A Bank Statement?
Also known as an account statement, a bank statement is a compilation of your bank account activity over a certain period. The document highlights your account details, including your name and account number, among other personal specifications. It also shows the transactions you make, such as deposits and withdrawals, and the charges and deductions you incur for every transaction, and more.
Despite the difference, these two documents have a common objective. They both give you an idea of your business’s financial performance. Consequently, you can use this information to make informed business decisions that’ll positively impact your business.
What’s The Period Of Generation?
Your bank will usually make a bank statement monthly. This period doesn’t necessarily have to correspond to the first and last date of a calendar month. For instance, your bank may generate your statement for a time frame beginning on the 15th day of a specific month and ending on the 14th of the following month.
However, other banks may generate these statements on a quarterly, semi-annually, or annually basis, depending on how often you make transactions.
On the other hand, as the director of your enterprise, you’re required to generate your business’s financial statement periodically. You should do so quarterly, that is, after every three months of a financial year. In some other scenarios, however, you may release them once a year.
What’s Their Value In Your Company?
As a financial statement gives an account of your company’s financial performance, it’s a handy tool if you’re seeking investment opportunities or financial aid, such as a bank loan. Additionally, financial statement data is required by tax authorities to ensure that your company complies with its tax obligations.
Financial statements must be highly accurate so that they can correctly present your financial situation. For this reason, they require auditing, which may be conducted by government agencies, auditing firms, or external accountants.
On the other hand, a bank statement enables you to keep track of the money in your account. The document helps you identify monetary errors, draw out a spending pattern and analyze it, and make better decisions that’ll see your company through to financial stability.
Like financial statements, bank statements should also be very accurate. A small error in a bank statement can go a long way into affecting your account status negatively. Errors in your bank statement may also indicate fraudulent activity from malicious parties.
You should, therefore, get yourself acquainted with how to carefully scrutinize and interpret a bank statement. This is so you can point out any errors to ensure that the money in your bank account is secure and accurate.
Conclusion
If you’re an entrepreneur or are planning to be one, the status of your finances should be among your primary concerns. It’s for this reason that you should pay close attention to your business’s financial records, like the financial and bank statements mentioned in this article.
You’re responsible for creating your company’s financial statements which are later analyzed by qualified auditors. These are crucial documents for your business as they point out the financial status of your company. As for bank statements, you’ll get one generated by your bank. You should know how to read and interpret it so that you don’t miss any errors, which if left unchecked, may have serious long-term consequences to your business’s finances.
The bottom line is that both these documents are essential for you to maintain a healthy monetary status and usher in your company’s growth.
About Carson Derrow
