The Balance Sheet is a mystical report for many. But it is a clear picture on a given day of the health and value of your business on a day in time. A snapshot. Having a predicted view of this is gold when making decisions about your future.

Predict’s Balance Sheet has more

VAT (GST) payments are one of the biggest challenges you have to manage in your business. One nearly shattered our founder, Hannah’s first business and so Futrli Predict “does” VAT/GST as it should:

  • VAT is calculated accurately using a combination of your actual and predicted data

  • VAT payments are highlighted in the predicted cash chart

  • VAT payment predicted amounts for your next payment are in a tile at the top of the Balance Sheet

  • VAT payments are separate rows, highlighted yellow in the Balance Sheet under your Bank Account and VAT liability.

A quick rundown of what’s in the Balance Sheet

The balance sheet shows values net of VAT (as the VAT is in it’s own separate line)

Assets - you own

A quick run through - but you’ll see these in the accounts that appear in asset rows.

  • Cash and cash equivalents

  • Accounts receivables (customers who haven’t paid you yet)

  • Inventory (stock)

  • Investments, like stocks and bonds

  • Real estate and vehicles

  • Copyrights, trademarks, licenses, patents and the company’s goodwill (standing in the community) count as assets, too, and they’re called intangibles.

Liabilities - you owe

A quick run through - they are like IOUs from your business to other people, businesses or entities. They aren’t always a bad thing - sometimes you need to take on debt to grow. You just need to know you can afford it. Predict will help you do that.

  • Accounts payable (suppliers you haven’t paid yet)

  • Mortgages

  • Loans

  • Tax

Equity - Ownership of your business

Total equity is what the company’s net worth is, after all debts are paid off (liabilities - assets).

  • Stock value

  • Retained earnings (cumulative profit from prior years)

  • Current year earnings (this year’s profit)

Who is interested in a balance sheet?

Investors: will use the Balance Sheet to see how the business is being run. Does it have debt? How much cash is in the bank? And what assets does it own?

Lenders: will use the Balance Sheet to see if the business has sufficient cash available, or easily converted short term assets (such as cash your customers owe you), to meet the monthly repayment plan of the suggested loan, they’ll also look at if you have other loans and facilities in place that may jeopardise its ability to repay a new loan.

How can you improve it?

By exploring different outcomes you can make your business more attractive for investment or funding.

Defer costs: if you have new costs coming in which you can defer (push back) then try and order them in at the start of your new financial year rather than this one. You’ll disclose a higher profit and therefore shareholder funds on your balance sheet. Be careful though, this will result in increased corporation tax so this approach might not be the best option for you. Try this in Predict.

Collect what your customers owe you: it will improve your liquid cash position increasing the confidence of potential investors or lenders. Try this in Predict.

Pay off loans: if you have enough cash - pay it off. You might benefit from cost savings on the interest too. A balance sheet with little or no debt is stronger than one with it. Try this in Predict.

Capitalise assets: this is an accounting term for making sure that all of the assets (machinery, property etc.) you have bought during the financial year appear in the fixed assets section and not in your profit and loss, as an expense. This has a double benefit as it increases your fixed assets value as well as your profit for the year by removing the cost from the P&L. This needs to happen in your accounting package and then re-sync Futrli.

How does a Balance Sheet balance?

Put simply, a Balance Sheet is like a snapshot in time. It tells you what your business owns (assets), what it owes (liabilities) and who owns it (equity).

  • This is not an accounting lesson, but every transaction created in the accounting engine respects the double entry accounting rule. Debits always equal credits. In turn, this will generate all 3 financial statements. Double entry accounting ensures a balanced balance sheet

  • It is therefore really important to understand how this looks into the future, once you get your head around it.

A balance sheet balances because:

  • Assets = Liabilities + Equity.

Or

  • Equity = Net assets (Assets - Liabilities). This is our preferred check as Net assets sit above Equity for easy comparison.

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