As entrepreneurs, it pays to be financially literate instead of relying solely on an accountant. Why? Eventually, it will fall to you to explain the numbers to your shareholders, your investors and yourself.
Don’t you love the idea of being able to go to a single document to quickly see where your money is going? I know you are probably thinking, “There’s no way I want to see how much money I’m spending, let alone see that my income does not cover my expenses!” But trust me, preparing and analyzing your personal income statement at least once a month will give you visibility into expenses that are more wants than needs. It will also open your eyes to the fact that maybe this is not the right time to lease that nice car on your wish-list.
I began preparing my personal income statement when I was 19. Since then, I have played with multiple versions and although I’m not sure I have mastered the skill of staying within my personal budget, I sure know where my money goes and where it should not.
Here are my 5 quick and easy steps to preparing a personal income statement and use it effectively.