That said, sole proprietorships make up more than 70% of all businesses. So, if partnership businesses are more likely to survive, why are there more sole proprietorships? The answer is: it can be hard to make a good partnership.

What does it take to make a good partnership?

Having a shared vision.

You need a shared vision for the partnership to work. If you have differences in your visions, find a way to compromise that suits both partners. For example, you want to open a restaurant with fine dining and your partner wants a bistro. You’ll find you disagree on almost every aspect from décor and hiring to pricing and marketing.

Strength compatibility

Everyone has different personalities and skills to bring to the business and when partners need and rely on each other’s abilities it makes the partnership stronger. For example, one partner is good at sales and marketing, while the other is good at accounting and inventory management. This allows each partner to focus on what they’re good at knowing their partner can take care of the areas where they are weak.

Define roles and limitations.

It’s important to define the responsibilities for each partner before you go into business together. Agree on things that will need consensus and those that do not. Defining the roles and limitations will help resolve any future disagreements. When the limits of each person are outlined, it will help to avoid conflict as well as, identify areas that you may need to hire someone to fulfill a skill gap in your partnership.

Strategies to resolve conflicts.

Even if the fundamentals of your partnership are strong, conflicts are certain to arise. It’s important to set up a regular schedule of communications between partners to resolve any conflicts. This will allow each person to discuss any issues without judgment. When a compromise is still difficult after the discussions, you may need a neutral arbiter, such as a consultant or a trusted employee.

Set up a goal system.

Establish a goal system for your business goals as well as individual goals. You will need to schedule regular meetings to:

Set your goals
The steps are necessary to achieve those goals.
Decide who needs to take the next action.
The expected date of completion.

Establish an exit strategy.

When things aren’t working out, it can be harder to exit than it was going into business with a partner. That’s why you need to establish a “buy-sell” agreement when you first start a business relationship. The agreement should state just how a partner can exit the business and at the same time create a fair valuation system to pay the exiting owner.

The post What Makes a Good Business Partnership? appeared first on VVREDDY & ASSOCIATES.

That’s why today, the financial experts at Virtual CFO Solutions will be breaking down the important financial statements you need to know.  Here’s how they can be used to leverage opportunities for your business!

What Are Financial Statements?

Financial statements are records and reports of all the financial activity that happens in your business. The most commonly used financial statements include profit & loss statements, balance sheets, and cash flow statements. 

How Are Financial Statements Used?

Financial statements are used as a general health check for your business – are you making a profit? Are your expenses being tracked properly? How can you strategically invest in your own business? 

In addition to your own knowledge, you may be looking for outside investment in your business. Financial statements are an important way for investors to get an unbiased view of how well your business is positioned for growth into the future. 

By making sure that you have accurate, up-to-date financial records, you can address any losses, capitalize on opportunities, and ensure you stay on the good side of the CRA!

How Are Financial Statements Prepared?

Generally, financial statements are prepared by your accountant, but with the advancement of cloud accounting software, these can be automatically generated for you. Our favorite cloud accounting software, Xero, can generate the reports you need from the accounting information you collect throughout the year. 

While having your financial statements available is one thing, ensuring that you are interpreting the data correctly and making the most of those insights is another. Having an expert’s eyes on your financials can help you see opportunities you may have missed, organize your business in a tax-advantaged manner, and ensure your business thrives in the long run. 

What Financial Statements Can Tell You About An Organization

Financial statements give a black and white look into the financial health of a business. The highlights of these documents include:

• Accrued profit
• Cash availability
• Cash received & used
• Where they are allocating money to expenses
• Where they are generating profit from
• How profitable a business is

These are all important factors in future viability and are important to keep an eye on, to ensure that your business is reaching its goals.

Investors and Financial Statements

While financial statements are prepared throughout the year, one of the most important times that you’ll use your financial statements will be when you’re seeking investment. Investors want to know the facts of your business’s financial situation, and financial statements are the best way to accomplish this. 

Why Financial Statements Are Important To Investors, 

Financial statements give investors the hard facts on your business’s financial position. They want to know your profitability, accrued assets, cash use, and investment in the business. Financial statements are an important part of any investment pitch! You may have big dreams, but you need a plan that will back up any big ambitions.

How Financial Statements Help Investors, 

Investors are looking at the big picture of your business, including your vision, goals, strategy, and past success. While it’s important to tell the story of your business, a big part of that is the financial background of your company. Investors are able to measure growth, opportunity, and potential to scale from these documents.

What Financial Statements Do Investors Look At

Investors review profit & loss statements to see how the business has historically performed, as well as pro forma statements, which forecast future growth. Both of these are critical in helping investors see the potential of your business!

Financial Statements For Sole Proprietorship

For sole proprietorships, one of the main measurements that owners keep an eye on is their net income through profit and loss statements. Unlike incorporated businesses, all profit after expenses is considered to be income and is taxed accordingly. This is why it’s so important to properly track expenses and determine how to best manage your profit & income through the business. 

Financial Statements For Corporations

Tracking your financial information accurately becomes even more important when your business is incorporated, as the reporting requirements from the CRA are higher. This is where having a professional to guide you is invaluable. Providing strategic input on retained earnings, dividends, expenses, and salary can help you position your business for growth while providing owners with the income they need. 

Are Financial Statements Confidential Or Public Information?

If you have a privately owned company, whether you’re a sole proprietor or a corporation, your financial statements are not public information. However, if you start trading publicly through stocks and outside investment, these documents do become publicly available to those with a vested interest in your business. 

Looking for guidance on your financial statements? Reach out to the team at Virtual CFO Solutions to prepare and analyze your financial statements, and get expert advice on planning for the future of your business!

The post A CFO’s Guide to Financial Statements appeared first on VVREDDY & ASSOCIATES.