If you’re starting a small business, hiring a professional to deal with accounting documents should be one of the first things you do. If you already own a business, it’s not too late to hire an accountant to keep your business on track financially.

Our licensed CPAs at Odoni Partners LLC have been the trusted business partners of entrepreneurs in Chicago for many years. We serve clients across many industries, specializing in healthcare, construction, realty, and more. Our reliable accounting services in Chicago, Illinois can help ensure you’re protected against audits and tax-related lawsuits.

According to our CPAs, these three accounting documents will help you analyze your business to determine what’s working and what you can improve.

Keep Track of Your P&L Statements

P&L stands for profits and losses, two essential measurements that will determine whether you’re making money. Some people may call a P&L report an income statement.

P&L statements track your capital and operational expenses, as well as your total earnings each quarter. If your revenues exceed your expenditures, you’re making a profit, but if they don’t, you’re taking a loss.

It’s natural for small businesses to sustain heavy losses during new product launches or expansions into new territories. However, repeated deficits over many quarters suggest an enterprise might go under soon.

Cash Flow Statements

Your cash flow statements provide an in-depth look at the health of your business. For example, your P&L report might show stellar profits this quarter and your bank account may have a healthy balance, but a sale of a large property is responsible for most of the income, and your business is bleeding.

Your cash flow statements account for the money people owe you, what you lose from depreciation, the sales and purchase of raw materials for your inventory, and the cash you owe your employees and creditors. These four components are what accountants call:

• Accounts receivable
• Depreciation costs
• Inventory
• Accounts payable

Your cash flow statements are the quarterly and annual budgets of your business. Accountants will refer to them when predicting your future expenses and revenues.

Take Care of Your Balance Sheet

Your balance sheet provides a snapshot of your business by reducing hundreds of financial items into an easy-to-understand equation: Assets equal liabilities plus equity.

For example, if you want to start a pizzeria, you might start by borrowing a loan from the bank, which becomes your liability.

You’ll also lease a store space, buy ingredients, and a couple of ovens. These investments and whatever cash you have left become your assets. As you sell pizza to customers, you generate earnings, forming the equity portion of your balance sheet as you reduce liabilities by paying your loans.

Call a Professional If You Have More Questions

Learn about important accounting terms and other accounting documents you need to keep, like sales invoices, remittance advice, credit notes, and cash memos, by contacting Odoni Partners at (312) 440-0960. We serve businesses in Wheaton, the North Shore, and Chicago.