How to make a startup balance sheet

The key components of a balance sheet are your business assets, liabilities, and equity, which determine your company’s financial position. Learn more about these below. 

Components of a balance sheet

Business assets

On a balance sheet, assets are divided into two sections – current assets and long-term fixed assets. 

Current assets are those you can turn into cash in 12 months or less. Long-term fixed assets would take more than a year to turn into cash. 

Fixed assets often include intangible assets like brand names and trademarks, as well as assets like common stock and real estate.

Liabilities

Liabilities can also be current liabilities like accounts payable and accrued expenses or long-term liabilities like bonds payable and mortgage loans.

As you develop your balance sheet, it’s important to consider your tax-related financial obligations as well. All taxes due within 12 months are considered current liabilities, while taxes due in more than 12 months are considered long-term liabilities.

Equity

Equity is a measure of the value of ownership in your startup. This is the amount of funds you and any other startup founders have invested directly or accumulated through retained earnings. 

You can calculate equity by subtracting your total liabilities from your total assets.

This figure gives you an idea of the net worth of your business. It’s the total amount of money each founder would be paid if you decided to liquidate the business.

A basic accounting equation known as the balance sheet equation further outlines how the relationships between assets, liabilities, and equity define your financial position.

That equation is as follows: Total Assets = Total Liabilities + Total Equity

4 Steps to create a balance sheet

Follow the steps below to develop a balance sheet for your startup.

1. Gather financial information

Start by gathering all financial information relevant to your business. This includes all statement balances as well as accounts receivable and accounts payable. As you gather your financial details, be sure to locate your tax information as well.

2. Organize current assets and liability totals

Now it’s time to start organizing your data into the balance sheet format. Start by separating each current asset and liability from your long-term assets and liabilities, as these are typically separate line items on the balance sheet. 

Then, follow these steps:

1. Add all of your current assets together
2. Add all of your long-term assets together
3. Add all of your current liabilities together
4. Add all of your long-term liabilities together

With this data, you know your total current and long-term assets as well as debt and liabilities. You can add your current and long-term assets together to determine your total assets. You can also add your current and long-term liabilities together to determine your total liabilities.

3. Calculate equity ratio

Determine your startup’s equity ratio by dividing the total shareholders’ equity by the total value of assets in the company. This ratio tells you what percentage of the company is funded by stakeholders and what percentage is funded by debt. 

The closer this ratio is to 100%, the better for the company and its stakeholders.

4. Prepare the balance sheet

Use a balance sheet template or accounting software to build out your financial statement with the data you’ve collected. If you’ve organized your asset and liability totals properly, this should be as easy as copying and pasting the data from one document to another.

Once you’ve ported all data over to your opening balance sheet, it’s time to print out and review your balance sheet report. From here, you can analyze your startup’s financial position, optimize operations, and strengthen your pitch deck.

Take action and drive financial success for your startup

As you build your startup balance sheet, you’ll begin to dive deep into your company’s financial reporting. This will show you what you’re doing right and help you spot opportunities for improvement. Moreover, if you’re interested in attracting investors, you’ll likely need a current and projected balance sheet at your fingertips.

Why wait? Start working on your balance sheet now to drive financial success for your startup or small business. Also, consider other financial statements to help you create comprehensive financial projections and get the full financial picture of your company.

For example, the cash flow statement can help you analyze your monthly cash flow, cash balance, and cash equivalents to help ensure financial stability. Meanwhile, the income statement can help you analyze your financial performance, providing insight into your revenue, gross profit, operating expenses, and net income. 

You can even harness the power of artificial intelligence to simplify and speed up the process.