Why Financial Statements Are Important for Entrepreneurs and Recommended Reading About Them
Why is it important to keep your financial statement in order?
Unless your an MBA, no one really teaches you how to do finances as an entrepreneur. You might have a book-keeper or accountant, maybe even a CFO, but they don’t always do a great job explaining how to interpret financial statements. Many early-stage entrepreneurs I know want to focus on everything — product, customer discovery, marketing, tech — except financial statements. In the early stage of a company, the financial systems might not be as important as generating positive cash flow.
However, once the business is self-sustaining, it’s important to get these financial systems set up. If you are looking to get a loan from a bank, an investment, or get acquired — all of these parties will look at your financial statements. Rather than taking their word for granted, you can do your own independent analysis and develop counter-offers as you negotiate.
More importantly, you should be looking at these documents on a regular basis to evaluate your own performance and calibrate your business accordingly. Your financial statements will tell you things like:
- How much money are you making as a business and how much it costs you to make that money
