One of the coolest features of the Crunch software is the ability to generate on-the-fly accounting reports. With literally the click of a button, Crunch can generate Profit & Loss accounts, Balance Sheets and even Interim Accounts using the data stored in our system. These are great for providing proof of income wherever you are – one client tells us she simply generated Balance Sheet on her iPad while in her Bank Manager’s office applying for a loan, and was approved on the spot!
These reports – though useful – are still pretty heavy-duty accountancy documents, so if you’re not financially-minded you may find them inducing tiredness or even nausea. We thought we’d take a moment to explain what’s actually on a Balance Sheet, and why you might need one.
You can find the definitions for all the items on your Balance Sheet in our mega accounting glossary, but we’ll run through the important bits.
Thinking like an accountant
You’ll notice your Balance sheet is split into years – these aren’t calendar years, but financial years. Those of you paying attention will have figured this out already, as the 2014 calendar year hasn’t started yet, but the 2014 financial year (often written 2013/14) has!
Everything included in your Balance Sheet will be segmented by date; the date the transaction took place, not the date you entered the item into Crunch. For example if you paid for a hotel room for that conference you attended in late February, but didn’t get round to recording it until last week, it will end up in your 2013 figures, even though it appeared in Crunch in 2014.
Don’t let the strange layout put you off either. The two-columns-per-year format is just to make reading the Balance Sheet a little easier. Every time you see a horizontal line, the figure directly underneath is just the sum of the two figures above it. And remember, figures (in brackets) are negative.
So what’s actually on a Balance Sheet?
Fixed & Tangible Assets
The jargon may put you off, but this one is quite simple; an asset is something your business owns. A fixed asset is something that isn’t going anywhere any time soon (things like property and vehicles). Tangible assets, meanwhile, are physical things that won’t be hanging around – for example stock or inventory.
Trade or Other Debtors
Another fancy name for something incredibly simple. Debtors just means people who owe you money. In the case of Trade Debtors, this will be outstanding invoices. Other Debtors refers to money your company is owed that isn’t through sales. In the case of Crunch clients, this will usually just be the Director’s Loan Account.
Cash at hand and in bank
This single entry is actually a combination of two different balances. The first, “cash at hand”, means physical cash your business has in its possession – notes and coins. The contents of your petty cash drawer, for example. The second, “cash in bank” is (obviously) your bank balance. It includes all your accounts, remember – so if you move your Corporation Tax payments into a second account, this figure is included.
Creditors falling within / after one year
Creditors are people who you owe money – the opposite of debtors! Payments to creditors must be recorded in the financial year you make the payment, so they are split into short term creditors (your suppliers, for instance) and those you expect to repay more than a year in the future (a loan from your bank, for example).
What does a Balance Sheet do?
Another name for a Balance Sheet is a “Statement of financial position”, which is probably a better description of this particular report. At its most basic a Balance Sheet is all the money your business has and is owed, minus any money you owe to others. The end result of a Balance sheet (the line labelled Net Assets) is how much money your business has at the time the report is generated (assuming the information you use to collate the Balance Sheet is up to date, of course).
So, if you want a more detailed snapshot of your company’s financial health than Crunch’s summary charts can provide, your Balance Sheet should be your first stop.
Use our Take-Home Pay Calculator to work out your true earnings and see if you could save money with a different company set up.
We make accounting simple
With Crunch, you’ll have unlimited advice and support from your dedicated client manager and our team of accountants, alongside innovative online accounting software so you can keep on top of your bookkeeping with ease. No appointments, no fuss.