Every business has several stakeholders. All stakeholders depend on the financial statements to provide them appropriate information for their needs. They will assume in most cases, that the financial statements are prepared in accordance with generally accepted accounting principles and that the same have been followed consistently from year to year. The Financial statements should address the information requirements of the user. Financial statement users are generally interested in the following three financial statements. The Income statement provides a picture of the profitability during a given period. The Balance sheet provides a snapshot of the financial position, assets and liabilities at a certain date. The cash flow statement shows the movement of cash in the business between any two given dates. Financial statements are the primary source of information about the company’s profitability, financial position and cash flow.

Let us now look at how the various users use the financial information. Investors need to look at profitability over time as well as comparison with industry, solvency as evidenced by the financial position and stability and continuity as evidenced by a strong cash flow. They will also be interested in the capital structure and what would contribute to the value of their holdings. The Lenders would be interested in knowing whether the company would be able to meet its cash obligations as they mature security of their loans and the company’s capacity to pay interest and repay the loan. They would also be interested in knowing whether the company is using working capital to finance long term projects? Suppliers rely on the information in the Balance sheet to determine whether to sell on credit to the company and what would be the dangers if any; Pension fund managers would look at the profitability and long term survival of the business and their stake. The Business managers are the immediate users of financial information. They have to understand how the business is doing on the financial front, spot problems that may be coming up on the horizon. An example could be inventory build-up or a receivable build-up that may lead to cash problems down the line.

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Cash flow statements alone do not tell you the whole story. Just knowing that cash has increased or decreased by X dollars does not tell us the whole story. Inflows and outflows are the results of various changes in the business, inflows from sales, capital invested, borrowings etc. Cash outflows result from payments being made for purchase of raw materials for manufacture, payroll and other expenses, interest on loan payments, investment in machinery, repayment of loans, payment of taxes etc.While understanding movement of cash is very important, we do not get the full story just by looking at the flows. There are two more reports that we need to look at, to understand the financial health of the business. One deals with the profitability and the other with the financial condition at any period in time.

Profitability is not equal to the increase in cash for any given period. Profit is an accounting determined number that primarily arises after matching costs with revenue. Stated simply, the cost of manufacturing Widget A is $3.Cost to sell Widget A is $1. The Widget A sells for $5. Profit is the sale value less cost of making and selling it. In this case, the profit is $1.

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Accounting involves identifying, analyzing, recording, and communicating the economic and financial information about an organization. Financial statements are the reflection of the financial heart of an organization.

Proper management of your business’ income and liabilities give you a better view of your financial statements. To assure business success and growth.

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QuickBooks is one of the most used accounting packages for small businesses around the country. It is a very affordable program with many special features you can use to track financial data for your business.

To track income and expenses by any significant segment of your business, you may want to use the class tracking feature in QuickBooks. You can use class tracking for non-profits to track grants and restricted and unrestricted funds. You can also use class tracking to tracking multiple locations or divisions of a company. If you are doing business with the government, you could use class tracking to track fixed priced jobs vs. cost plus jobs, vs. overhead. To turn on class tracking:

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