Understanding Financial Statements: What Every Small Business Owner Should Know

Running a business isn’t just about making sales — it’s about making sure the money actually shows up when you need it.

GNEC recently hosted a live webinar in partnership with TD Bank to help small business owners better understand their financial health, without relying solely on an accountant. Tom Loucopolos, VP Senior Relationship Manager at TD Bank, led the session. According to a U.S. Bank study, 82% of business failures are linked to poor cash flow management — or a poor understanding of how cash flow impacts the business overall.

Here are the key takeaways.

Why Small Businesses Struggle Financially

Most entrepreneurs focus on revenue, not cash flow. A common misconception is: “If I’m making sales, I’m doing fine.” In reality, this thinking overlooks the cash-out side of owning a business. You don’t want to find yourself needing to pay a vendor in 15 days — but not getting paid yourself for another 30.

Understanding where your money is coming from is just as important as knowing where it’s going.

What Is Cash Flow?

Cash flow is simply money moving in and out of your business. It determines your ability to pay bills, hire employees, and grow your business over time.

Two key concepts to understand:

• Accounts Receivable Turnover — How quickly your business collects money owed by clients
• Accounts Payable Turnover — How quickly your business makes payments to creditors

Together, these give you a clearer picture of your cash timing — and help you run a more profitable operation. Keep in mind: profit doesn’t always mean money is in the bank.

The Four Financial Statements Every Business Owner Should Know

These four statements work together to give you a complete view of your company’s financial health:

1. Balance Sheet — A snapshot of your business’s cash position at a specific point in time
2. Statement of Owner’s / Stockholder’s Equity — Shows how much your business is retaining in earnings and what can be reinvested
3. Income / Profit & Loss (P&L) Statement — Tracks revenue, expenses, and profit (Revenue − Expenses = Profit)
4. Cash Flow Statement — Shows money in, money out, and how well your business generates cash to cover debt and operations

During the webinar, Tom walked through a real example of each statement — making it easier to see what each one looks like in practice.

What Financial Clarity Can Do for Your Business

When you have a clear picture of your finances, you can plan ahead — instead of constantly reacting.

Mapping out your business’s needs month by month helps you spot where you have excess and where you’re running thin. That clarity makes it easier to think through decisions like hiring, buying equipment, managing client workload, and preparing for seasonal shifts in revenue.

It also means you’ll look at your numbers more regularly — and build a stronger understanding of how your business actually operates.

How to Get Started

Many small business owners start with spreadsheets, and that’s a perfectly fine place to begin. As your business grows, more robust tools become necessary.

Platforms like QuickBooks can help automate tracking, organize financial data, and simplify reporting.

Support matters too. Through GNEC’s Backstop Program, small business owners can access bookkeeping support, financial guidance, and hands-on help with tools like QuickBooks — so you build a real understanding of your financials over time, not just data entry.

TD Bank also shared a few resources to help you get started:

• 4 Financial Statements to Manage Small Business Finances — An overview of the statements covered in this webinar
• Financial Coaching from NFCC — Coaching and educational programs designed for small business owners
• Choose My Product — Help selecting the right TD Bank account for your business

Ready to take control of your business finances? Learn more about the Backstop Program and other small business support programs, and events on our website.