Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsFinancial Guide for SMEsAppendixSummary of Tips and HintsImplementing good financial practices in your business will provide soundfinancial information that can identify current issues and be used to planfor the successful financial future of your businessSection I : Business Finance BasicsFinancial statements provide information on how the business is operatingfinancially and why. Ensuring if these statements are produced regularlywill provide financial information for continuos improvement of businessoperationsChapter One - Understanding FinancialStatementsTopic Hint TipRegularly (monthly) produce profit and lossinformation and compare against activities inthe previous months to ensure that yourprofit expectations are being metOnly those businesses that have goods (products)to sell will use the calculation of cost of goodssoldIncomeStatementA prosperous business will have assets of thebusiness funded by profits rather than beingheavily dependent of funding from either externalparties (liabilities) or continuous cash injectionsfrom the owner (equity)Balance Sheet The diagramme shows how the balance sheetworks. The business requires assets to operateand these assets will be funded from the equityin the business, the profit from the operations ofthe business or by borrowing money fromexternal partiesUse the Cash Flow Statement to analyse if youare spending more than you are earning ordrawing out too much cash from the businessStatement of cash flows only shows the historicaldata and differs from a cash flow forecastStatement ofCash Flows168168 155chapter 7-13 p79-181 Eng.indd 1688/15/11 5:03:10 PM