The RIGHT Way to Present Financial Statements to Clients

There are a lot of poor practices when it comes to presenting financial statements. When you present financial statements to your clients, you should always present three documents: the balance sheet, the income statement, and the statement of cash flows.

[2:35] All three are crucial. If you are only presenting the balance sheet and the income statement, you are leaving out a critical element. Analyzing the cash flow is the lifeblood of the business. If you’re not currently presenting the statement of cash flows, your first step is to learn how to create it and start presenting it to your clients.

[3:55] The second thing is to present the statements using the accrual basis even if the business uses the cash basis for tax. Timing is the difference in the accrual basis because it gives you an accurate picture of the financial health of the business that can’t be manipulated.

[5:40] One challenge that bookkeepers encounter is when Quickbooks presents the balance sheet one way, they assume that’s the right way. It’s up to you to customize them so they are accurate.

[6:25] You should also use a multistep income statement that includes all the business’ relevant numbers. It’s important to separate out direct and indirect costs once you start doing financial analysis. Putting everything into one expense category is a common mistake.

[8:30] The statement of cash flows goes through the business from operating, investment, and financial perspectives. The key metric for any business is the cash flow from operating activities.

[9:40] The most important thing is to present the financial statements and interpret them for your client, don’t just give them to them. Help the client see what the numbers mean in a way that they can understand.