Business plans & financials

Even as a small business, there are a variety of documents you need to create and keep. One of the first documents you might create for your small business is a business plan. Even if you haven’t done one yet, this can be a very useful tool for you (read on to find out why).

In the course of your business, you will also create a variety of financial documents or statements – on a monthly and annual basis. These can include a balance sheet (now called the statement of financial position), income statement (now called a statement of comprehensive income), cash flow statement, statement of changes in equity and the director’s or owner’s report. You may need some or all of these, depending on your business and stakeholder needs.

Your business plan

There are a multitude of resources available to help you write up a business plan. Do a quick internet search and you’ll find hundreds of articles and templates to help you, and many of them free.

Using the examples these resources provide, you can draw up a business plan that’s relevant for you and your business. In general, a business plan will help you identify opportunities, eliminate risks, create focus and direction, and provide clarity on financial and cash flow needs.

A business plan shows whether or not a business has the potential to make a profit and for this reason may be one of the key documents you’ll need if you pitch to an investor or apply for a loan. But even for the sake of your own clarity, writing up a business plan is a very useful exercise. It’s also a document you’ll revisit again and again, adapting and changing it as you reach new milestones, encounter new challenges and develop new ideas.

Your financial statements

There are different levels of financial statements, these include your management accounts (produced monthly or quarterly), your annual financial statements (frequently termed by its abbreviation, AFS) and audited financial statements.

Management accounts are important in that they are used in the day-to-day running of the business and for quick decision-making. They also serve to keep a record of your financials in preparation for year-end.

Your annual financial statement is a formal report summarising the results of the business and must be prepared by a qualified accountant. They can be used for your SARS tax submission as well as for loan applications.

The audited financial statement is similar to the annual financial statement but with additional oversight and verification steps. It is a statutory requirement for certain business types and must be performed by an independent, qualified accountant.

As the business owner, you will need to know the level of financial statements required of you and must make sure that these are done.