Understanding Your Balance Sheet
May 25, 2025
Let's break it down, plain and simple.
Your balance sheet gives you a snapshot of your business at a specific moment. It shows what you own, what you owe, and what’s left over - your equity. It’s a tool for clarity and smarter decisions, no matter what stage of business you're in.
The Three Key Parts
1.
Assets
– These are the things your business owns that hold value.
This includes bank accounts, tools, vehicles, property, inventory, and even unpaid invoices (accounts receivable).
2.
Liabilities
– What your business owes.
Bills to pay, wages, tax obligations, loans, or customer deposits. These can be short-term or long-term.
3.
Equity – What’s left once you subtract liabilities from assets.
This represents your share of the business—money you’ve put in, profits retained, and drawings.
A Quick Example
You buy a van for $50,000. You pay $10k upfront and finance $40k.
• Your assets increase by $50k
• Your bank balance drops by $10k
• Your liabilities rise by $40k
Everything balances—just like it should.
Why It Matters
Your balance sheet isn’t just numbers on a page. It’s a tool that helps you understand where your business stands, allows you to track changes over time, and plan your next move with confidence.
If you're not sure how to read your balance sheet, or what to do with the information, remember that’s what we’re here for! Let’s make sense of it together.
Get in touch today, and we'll help you understand the big picture.
We’re trading in uncertain times, where changes to the global economy can happen overnight. This creates a real challenge for your business, making it difficult to plan ahead and understand the short to medium-term future of your financial strategy. But by monitoring and analysing your business data, it is possible to get back in control of your financial management, and to reduce some of the financial uncertainty. Good business decisions are based on solid and reliable information. That’s why it’s so important to track and monitor your business performance.Using the metrics and data from your business dashboard, you can follow your progress against budgets and financial strategies – and see when fast, evasive action is needed.
Running a business can be deeply rewarding, but it also comes with pressure. At times, it can feel like the responsibility rests solely on your shoulders: managing cashflow, people, operations, growth, and compliance - all while trying to make the right decisions, day after day. That’s where we come in. At Crossroads, we don’t just take care of your accounting and tax - we partner with you in the bigger picture. As your business coach, we walk alongside you, helping you step back from the day-to-day and take a clearer look at where your business is going, and what might be holding it back.
The beginning of a new calendar year is an excellent time to review last year and reflect on what worked, what didn’t, what you’d like to change and new things you want to implement. Take the time to review the year and acknowledge all that has happened, good, bad or indifferent. Examining the year with an objective perspective can provide valuable insights to prepare for the coming business year. Planning and goal setting will help provide a focus for your business efforts. Your Yearly Business Review What were the most significant impacts on your business in the last 12 months? How well did you meet the challenges? What worked well last year? What systems, technology, products or services were successful? What accomplishments can you celebrate? What situation, event or experience provided the biggest learning opportunity? What is the biggest challenge or frustration you face as you prepare for the year ahead? What did you most enjoy during the year? Do more of it. What did you least enjoy? Do less of it! Analyse your financial reports. Are you earning what you’d like to? Is the business sustainably profitable? Get Ready for a Great Year While there are many metrics you could evaluate to track business performance, we’ve given you just a few ideas to inspire your business planning for a positive start to the year. If you’d like to chat about what you can do differently this year to enable your business to thrive, book a time with us today.