The BS, FE and CF Statements are referred to as “integrated financial statements” for the reasons defined above. While each serves their own purpose in tracking very specific information and allowing individual summary calculations they are also related. Like first cousins, they contain some of the same genetic (financial) material but each have their own unique purpose amongst the family of financial statements in providing specific information about the life of your business.
The BS is a snapshot of the Solvency of the business at a specific moment in time. The amount by which assets exceed liabilities is the “Net Worth” of the business. The FE Statement is a dynamic accounting of the incomes and expenses over the accounting period. The CF Statement accounts for all inflows and outflows of cash over the same period. The complete set of statements represents a decision tool allowing a comprehensive analysis of your business.
The “fence” for the present year also forms the base structure for the coming year. From it the Solvency and Liquidity momentum for the coming year is set. From this foundation you can plan/budget for the coming year by projecting cash inflow and outflows, thus facilitating risk management strategies that lower stress and identify business opportunity.
Are you interested in planning for the next swing in volatile milk prices and production input costs? UW-Extension can help you get the job done! Contact your farm records association field staff, technical college farm trainer or local UW-Extension Office. This educational program is support by a North Central Risk Management Education Center Grant.