If you want your business to prosper, you need to apply corrections in time, before it is too late, keeping the company’s accounting in the correct way. The ideal accounting instrument to analyze the state of your SME, know its current situation and its evolution over time is the balance sheet , which must be carried out from the first year of the company as it will also help you lay a foundation strong financials that drive business growth.
What is the balance sheet?
The balance sheet is a “snapshot” of the company at a specific time . It is carried out based on the accounting of the company, analyzing both the assets and the debts and obligations, as well as the net worth of the company.
Since it is a true picture of the economic situation of the company, it is advisable to do it at different times throughout the year, especially if your SME has a large turnover:
Initial balance sheet.
This is a balance sheet that is carried out at the beginning of the year to establish a starting point for comparison. In this case, the balances are presented grouped to facilitate the comparison of the data.
Checking balance.
It is an intermediate balance between the beginning and end of the year to assess the status of the accounts and check the correct functioning of commercial operations, avoiding surprises at the end of the year.
Year-end balance sheet.
This balance sheet is made at the end of the year in order to verify the operation of the company throughout that period.
Who should present the balance sheet?
All mercantile companies must present a balance sheet . SMEs and freelancers can present an abbreviated balance sheet, as indicated in article 257 of the Capital Companies Act , provided that they meet two of these conditions for two consecutive years:
- The total assets must not exceed four million euros.
- The net amount of the annual turnover must not exceed eight million euros.
- Not having more than 50 employees during the fiscal year.
What is the structure of the balance sheet?
The structure of the balance sheet is divided into three parts: assets, liabilities and equity.
Active
The assets of a company include both property and property titles as well as debts receivable. They are reflected from lowest to highest liquidity according to the ease of converting into cash.
Non-current assets: Represents all the assets, properties and rights of the company that are difficult to convert into cash within one year.
- Inmobilized material. They are the real estate and / or machinery in the name of the company.
- Intangible assets. They are the patents, industrial designs and / or rights of the company.
- Financial assets. They are the company’s long-term investments.
Current active. These are the assets of the company that can be easily converted into cash in the short term.
- Stocks. They are merchandise for sale and raw materials for sale or invoicing.
- Realizable. They are the rights to collect from customers for the sales made or services provided.
- Available. It is the liquidity that the company has in cash or in its checking accounts.
passive
It includes the sources of financing of the company.
- Non-current liabilities. Debts with long-term maturity, greater than one year.
- Current liabilities. Debts that mature in the short term, in less than a year.
Net worth
It is the set of own capital with which the operation of the company is financed, which includes both the contributions of the partners and the accumulated profits.
To affirm that the company is in good economic health, current assets must be greater than current liabilities, which will avoid short-term liquidity problems . On the other hand, the net worth must range between 35 and 50% , depending on the type of activity. These details of the balance sheet will give you an idea of the ability of your SME to move forward.
