Knowing how to read and compile a financial statement is critical to ensuring the success of your insurance agency, helping you understand the steps you need to take to become more profitable and productive.
Here’s a quick rundown of the two most important elements of your statement, the balance sheet, and income statement:
Your balance sheet is like a snapshot of your agency’s financial health at any point in time. Each day, your balance sheet will fluctuate, based on the business your agency conducts. The balance sheet includes your agency’s liabilities, net worth, and assets. Generally speaking, liabilities are funds that your agency owes to lenders and creditors; net worth represents the investment of the agency’s owner; and assets refer to funds or other things of value that the agency owns or which are owed to the agency. By tracking changes in your balance sheet, you can determine how well your agency is performing and where specific changes need to be made to increase productivity and performance.
Also called a profit and loss statement, the income statement represents income (earnings) and expenses over a specific period of time. It reveals the amount of money the agency will make after expenses are deducted. That’s just the tip of the iceberg. Take some time to pour over your agency’s financial statements so you can develop a deeper understanding of its operations and take steps to make it even more productive.
And don’t forget to visit the American Agents Alliance website to learn more about how we can help you become more productive and profitable.