One of the most important parts of the Treasurer’s Report is the balance sheet.
The Small Business Development Corporation of WA says,”The balance sheet is a statement of what a business owns (assets) and owes (liabilities) at a specific point in time. It lists the assets that the business owns, the liabilities owed by the business, and the value of the owner's equity (or net worth of the business).”
The balance sheet is a statement showing the financial health of the business and is a legal requirement for most organisations.
But how useful is a balance sheet? To most people who read it, all they see is a blur of numbers that mean very little. Indeed, even the full length balance sheet, usually compared to the previous year’s figures, means absolutely nothing to the layman so is there any real point in putting it in?
1. They are costly to prepare.
2. They take up time that the Treasurer could better use.
3. No one reads them anyway.
4. Very few people actually understand what they are reading.
5. The report is probably out of date by the time it is published so it doesn’t accurately reflect the financial position anymore.
6. One tiny mistake in the calculation of assets or liabilities can make the report invalid.
7. If you were debt free on 30th June but took out a huge loan on 1 July the balance sheet becomes irrelevant in your financial planning.
With all those negatives, I ask you for your opinion. Do you think that balance sheets matter?
