EP.33 – How to Read and Interpret a Balance Sheet - Part 8

Whether you're launching a startup or taking over an existing business, understanding balance sheets is critical to your success. This concluding part of the series spotlights an often-overlooked aspect of business finance – receivables. Perspectives were shared on the importance of regularly reviewing accounts owed to you and scrutinizing long-unpaid debts. Don't just wish and wait; take action to ensure your assets are not tied up in bad debts.

This episode wraps up with a comprehensive recap of how to read and interpret balance sheets, equipping start-ups with non-finance backgrounds with practical, simple strategies. If you find this episode beneficial, we encourage sharing it with other entrepreneurs. Remember, constant learning and positive connections are keys to successful entrepreneurship.

This episode is part of an ‘8-series’ show on how to read and interpret a balance sheet. This is part 8, bringing us to the end of the series.  

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Episode Transcript

(00:00):
Music.

(00:06):
Are you starting a small business or buying an existing business?
This podcast, Startup Your Small Business and Learn, shares perspectives using
the psychology of retail and financial awareness, all with a reasonable dose of optimism.
The show promises to give startup solopreneurs insightful strategies and practical

(00:29):
solutions that supports the mindset to execute business projects.
My name is Ola Williams, your host on the show.
I encourage you to join me to learn with positivity and great exchange of ideas.
Okay, another one, you don't want to have receivables, money people are holding

(00:54):
you that are like very hold.
So you need to ask your accountant for the schedule of the people that are holding you money.
And when you take that schedule, if you see somebody that's owing you money
and the money has been owed for the past two years, for example,
more than two years, even a year, you should start asking questions.

(01:19):
Why is the money not being paid? What's going on? Is that money recoverable
or is it a bad debt already?
Ready is do you need to write it off and just forget
about it because there's no point carrying an
asset irreceivable that somebody is
not going to pay you back that means you're just living in you know it's just

(01:40):
a wish that it's not going to come true so that's a warning sign so you want
to quickly clean that up with your accountant based on your review you want
to make sure that the The people that are holding your money,
they are able to pay.
You have some commitment from them and you go after the money.
And anyone that has been holding your money for a long time,

(02:02):
you want to make sure that you are sure that that money is still going to be
paid and justified that it's still going to be paid.
Music.
If you've enjoyed this episode and learned something or the show has benefited
you in any way, I encourage you to please hit the subscribe button and share

(02:25):
this episode with people so they too can learn.
This action of yours ensures that we continue to give you content that adds value to you,
supporting our commitment to be providing high-quality content and fostering
a community of informed and successful entrepreneurs.

(02:45):
You know, another warning sign is you want to quickly look at the year,
the previous year to the year you're reviewing or the previous period.
I want to look at the movement between.
So take for instance, you're looking at maybe in the last session,
we're talking about people that owe you money.

(03:06):
So you're looking at the previous period.
And let's say you're looking at 2022, you're comparing with 2023.
And in 2022, you saw that, you know, I can't receive it. People that owe you
money, maybe they were like $500 in 2022.
And in 2023, that has jumped to like $1,500.

(03:28):
Oh, you know, you want to ask questions. You want to, why?
Why have more people suddenly owe you money? What's going on?
You want to be collecting those money.
You want to, you should, you should do. What's the, why did it jump up so much?
So that's another warning sign.
There's something going on there that you need to understand.
Music.

(04:35):
So hopefully in all of this, you've been able to have some things that are valid to you.
You now understand the reason why you need to pay attention to your balance sheet.
I know talking about balance sheets could be a loss, especially for somebody
that has non-finance background.
So a recap. So far, we've been looking at the topic, how to read and interpret a balance sheet.

(05:00):
This series is for startup small business folks with non-finance background.
We started with explaining assets and liabilities to a six-year-old.
Then we moved on to explain equity in simple terms.
Then there were a few questions that came in which I tried to answer to the best of my ability.
Firstly, we looked at practical tips for improving balance sheets without getting

(05:23):
into complex financial jargon.
Next, I shared my insight on warning signs in a balance sheet that you should
be aware of as a small business owner. And with that, it's a wrap on the series.
Hoping the information is useful to you. And if so, I encourage you to please
share with others so they too can learn. Thanks very much.

(05:51):
Those are the questions I received and I've tried to answer them to the best of my ability.
If you have more questions or you have comments specifically about how to read
and interpret a balance sheet,
please do share them with me through the channel in the show notes and I will

(06:13):
attend to them. I promise.
If you would like your voice notes to be featured on the podcast episode,
let me know as well and I will feature it on the podcast episode.
Thanks for listening. Hopefully that added value to you.
I do like to say that the show aims to highlight broad business patterns that

(06:38):
are considered same as ever.
However, I also acknowledge that personal circumstances may differ.
So please apply the lessons in line with your context and seek professional
guidance as may be applicable to your business.
Until next episode, please do share the show so value is added to others as well.
And remember, let's continue to learn together and be encouraged to keep on connecting.

(07:05):
Music.