It is important that we make ourselves available in order to help others when possible and that they too can help us in precious moments. Teamwork works better than individual work if you want to achieve goals, improve on a day-to-day basis and create a climate of trust and respect.This accounting report tells the entrepreneur if the company is really profitable.
Every business basically has fixed costs and expenses as well as variable costs and expenses
A data of great relevance for entrepreneurs is the volume of sales; But just as relevant is the direct cost of those sales, the marginal profit, the costs and expenses to operate the business, as well as the net profit before taxes.
All these data are of great relevance for the entrepreneur when determining what measures he can take to increase sales, lower costs and increase profits. That is, what to do to make the company more profitable.
In consulting we recommend that the Income Statement should go beyond just showing the global data of the company, we also recommend that they be “opened” by department, by business, by branch, for the most important clients or for the largest products. The right tax options are also there with the tax software for tax preparers now.
What information does the State of Origin and Application of Funds show?
The accounting report that we call “Statement of Origin and Application” could also simply be called “Cash Flow”. In consultancies we use another very useful version called “Free Cash Flow”.
- This report should not be confused with one that the external auditors prepare when they issue the annual report on financial statements. This report is called “Statement of Changes in Financial Position” and it is very different. In another article we will be explaining it.
- The Statement of Origin and Application of Funds shows the entrepreneur the flow of funds entering and leaving the company.
It tells you where resources are being obtained: cash sales, collection of credit sales, loans from third parties or partners, contributions from partners, and so on.
The above with respect to money inflows and also shows money outflows: payment to suppliers, cash purchases, payment of wages and payroll, payments to the government, payment of expenses, payment of debts, etc.
Importance of Financial Statements
The financial statements are of great importance and relevance for the employer, he must demand the presentation and explanation of the statements in the first ten days of each month.Financial statements are an “x-ray”, the “thermometer” that marks the success of a company.They must be analyzed monthly by the employer and by the Board of Directors, if it exists in the organization.