Mikael La Ferla Explains What Philadelphia Business Owners Should Look for in Their Financial Statements

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Receiving a monthly financial report is only useful if a business owner understands what it says. According to Philadelphia accountant Mikael La Ferla, owners do not need to be accountants to understand the numbers that matter most.

The income (or profit and loss) statement shows how much money the business earned, how much it spent, and whether it made or lost money during a specific period.

Mikael La Ferla recommends comparing revenue and expenses with prior months. If sales increased 10% but expenses increased 20%, for example, the business may be growing without actually becoming more profitable.

Next is the balance sheet. The U.S. Small Business Administration describes the balance sheet as a snapshot of a company's finances. It shows what the business owns, what it owes, and the owner's equity in the company. Business owners should pay particular attention to cash, outstanding customer balances, loans, credit cards, and other major liabilities.

Cash flow provides another piece of the picture. A business may show a profit while having little cash available because customers have not paid yet or because money was used to repay debt, purchase equipment, or cover other costs. Looking at profit and cash together gives owners a much clearer understanding of the business.

The U.S. Small Business Administration identifies the income statement, balance sheet, and cash flow statement as the three main financial statements used to understand profitability, financial position, and available cash. These reports can help owners track performance and make better business decisions.

Mikael La Ferla believes financial reporting should answer basic questions: Are sales improving? Are expenses growing faster than revenue? How much cash is available? How much does the business owe? And are customers paying what they owe?

Helping owners answer those questions is part of the work behind La Ferla Accounting. Founded by Mikael La Ferla, the Philadelphia-based bookkeeping and accounting business provides monthly bookkeeping, financial reporting, bank reconciliations, accounts payable, bookkeeping cleanup, and real estate accounting.

Mikael La Ferla has also applied his accounting and finance background to Shopden, a personal finance application focused on expense tracking and financial organization. More information about his professional background and projects is available through Mikael La Ferla's personal website and LinkedIn.

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