Understanding Your Financial Statements: A Simple Breakdown for Non-Accountants

At Doumouras + Company, we believe business owners shouldn’t need an accounting degree to understand how their business is doing. Whether you're a solo entrepreneur, nonprofit leader, or growing small business, understanding your financial statements is key to making informed decisions.

Here's a straightforward breakdown of the three most important financial statements—no jargon, no fluff.

📄 1. Profit & Loss Statement (aka Income Statement)

What it shows:
Your revenue and expenses over a specific time period—usually monthly, quarterly, or yearly.

Why it matters:
It shows whether you’re making a profit or running at a loss.

Key things to look at:

• Revenue: Your total sales or income

• Cost of Goods Sold (COGS): What it cost to produce your product or service

• Gross Profit: Revenue minus COGS

• Operating Expenses: Rent, payroll, marketing, etc.

• Net Income: Your bottom line (profit or loss)

Tip: If you’re consistently profitable on paper but struggling with cash, that’s a sign to look at your cash flow statement next.

📊 2. Balance Sheet

What it shows:
A snapshot of what your business owns and owes at a specific moment in time.

Why it matters:
It tells you about the overall financial health of your business.

Key sections:

• Assets: What you own (cash, equipment, receivables)

• Liabilities: What you owe (credit cards, loans, unpaid bills)

• Equity: What’s left for you (or your shareholders) after debts

Formula:
Assets = Liabilities + Equity

Tip: If your liabilities are climbing faster than your assets, it may be time to adjust spending or revisit your pricing model.

💵 3. Cash Flow Statement

What it shows:
The inflow and outflow of actual cash—money moving in and out of your bank account.

Why it matters:
Profit doesn’t always mean you have cash. This report shows if you can pay your bills, payroll, and invest in growth.

Sections include:

• Operating Activities: Day-to-day income and expenses

• Investing Activities: Equipment purchases or long-term investments

• Financing Activities: Loans, owner draws, investor funding

Tip: Regularly monitor this report to avoid surprises—like overdraft fees or late payroll.

🎯 Final Thoughts

Understanding your financials doesn’t have to be overwhelming. When you know what each report is telling you, you’re empowered to make smarter, faster business decisions.

At Doumouras + Company, we walk clients through these numbers regularly—so you’re never in the dark. If your current accountant just sends reports without explanation, it’s time for a change.

📢 Need help understanding your numbers?

Let’s schedule a free consultation. We’ll review your books, answer your questions, and help you feel confident in your finances—no accounting speak required.

📧 cora@doumourascompany.com
🌐 www.doumourascompany.com
📞 920-355-1522