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Balance Sheet Basics
Learn how to prepare and use a balance sheet to draw insights into the financial health of your business
Introduction
The balance sheet captures assets, liabilities and net worth and provides a snapshot of financial position in a business. It enables successful managers to assess critical data and metrics, observe trends, benchmark and plan for the future.
Components
- Current assets
- Non-current assets
- Current liabilities
- Non-current liabilities
- Net worth
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Agriculture, seafood, and forest products operations use the balance sheet as a statement of financial position. This powerful statement reflects the sum-total of all past business transactions and captures every item that is owned and owed by a business at a point in time. Balance sheets prepared at regular intervals allow business owners to assess comparative results and track financial performance. This makes it an important communication tool among family members, business partners, and third parties, not only to stay aligned, but also as a learning tool for newer members of the business team.
Beyond serving as a statement of financial position at a point in time, the balance sheet enables operations to plan for possible scenarios and answer strategic questions like:
- Do I have sufficient working capital to cover unexpected increases in input costs?
- Am I prepared for the next opportunity for growth?
- How much debt can the business afford?
- Should we consider purchasing new equipment now?
- Or whatever your big what-if or strategic question is…
Templates and Tools
Next Steps
Once you have built the balance sheet, take your financial statements to the next level with more financial tools or a discussion with your Northwest FCS team.
Lender Discussion
Schedule a meeting with your Relationship Manager to review the balance sheet together. Discuss the following:
- What am I missing?
- What do you see as my operation's financial strengths and weaknesses?
- Review key ratios and metrics.
Additional Financial Management Resources
Learn more about financial management for agriculture, seafood, and timber operations with additional resources from Northwest FCS: