Episode 11 // Eight Fundamentals to Decoding Financial Statements

Championed by our friends at Community Futures Manitoba

It’s time to rip off the blindfold and stop hiding from the numbers.

In today's episode of the Gab Lab, NTN Pro, Shauna Frederick, Founder of Frederick OTG (On the Go CFO) and Co-Founder of the Finance Café, helps us crack the code and decipher the numerical revelations embedded in our financial statements.

As Shauna points out, many of us start our business because we’re passionate about what we do and are excited to bring our ideas to market. Unfortunately however, finances are often the last thing we want to deal with, and when we summon the courage to do so they appear to be written in a language foreign to most Founders.

Today's the day we demystify financial statements

Part 1 // A Snapshot That Speaks Volumes: The Balance Sheet

As Shauna explains in our first of three segments, the Balance Sheet reveals what accountants call the “Book Value” of the business.


Your business’s value is a financial construct factoring inputs like short, and long term, assets weighed against short, and long term, liabilities.

Tune in as Shauna provides examples of each of these inputs to help you better understand the current "book value" of your business, as you gain important insight into better understanding how 'leveraged' and 'liquid your business is. These are two important calculations every Founder should come to familiarize themselves with, as they tend to be some of the first numbers lenders look at.

Part 2 // The Income Statement: Where the Bottom Line Steals the Show

Don’t let the title deceive you. While the Income Statement serve a different purpose than that of

the Balance Sheet, there is a common link—the bottom line—aka, the "Net Income" or "Net Profit".

As Shauna explains, when your bottom line is positive, you’re effectively adding value to your business because the money ends up in Retained Earnings on the Balance Sheet. But, if y our bottom line is bleeding red, the value of the business is decreasing.

When it comes to the top line, Shauna points out that accountants use an accrual basis of accounting for the Income Statement. Translated, this means when a sale is made, it’s accounted for in your company’s revenue, regardless of whether the payment has been received or not. This, obviously, has the potential to skew the reality of your bottom line results.

Tune in as Shauna shares with us what to watch for in our Income Statement, how often we should be checking it, and what numbers to cross-reference to ensure we’re getting the full story on our bottom line.

Part 3 // The Most Intuitive of the Group: The Cashflow Statement

This, Founders, is where we transition from accrual to cash basis.

We’ve highlighted this in previous episodes, and can't stress it enough:

Profit ≠ Cash

This is why the Cash Flow Statement is needed to complete an accurate snapshot of the current health and functionality of your business.

The Cash Flow Statement is believed to be the most intuitive of all the financial statements as it follows every transaction made by the business—money received and money spent. The sum is referred to as the 'Net Cash Flow".

Tune in to Part 3, as Shauna and Taunya review best practices and warning flags in each area of Income, Cost of Goods, Pricing and Expenses. You’ll uncover ways to unlock the cash currently held captive in your business, and learn how to use a Cash Flow Forecast to deliberately and intentionally plan for a healthy bottom line.

// Download the free tool and templates

The Playbook // Cashflow Forecast // The Highways and Hazards