How Founders Can Use Financial Reports to Grow Their Startup—Even Without an Accounting Background

Most first-time founders have never seen a Profit and Loss statement until they sign up for QuickBooks. And that's OK.

You don’t need to be an accountant to understand your business financials—you just need to know what to look for. Knowing how to pull and interpret basic financial reports empowers you to make smarter decisions, engage more effectively with your advisory board, and grow your revenue with confidence.

Even though advisory boards don’t have fiduciary responsibility like a board of directors, sharing financial reports with them—when you're ready—can lead to better decisions, sharper feedback, and more strategic conversations. This guide introduces four key reports every entrepreneur should know. You’ll learn what four key financial reports tell you, how to use them, and how to take action—no accounting degree required.

Profit and Loss Statement (P&L) or Income Statement

What it is:

The Profit and Loss Statement—also called an Income Statement—shows how much money your business earned, spent, and kept over a specific time period (monthly, quarterly, annually). It includes total revenue, direct costs (like materials or labor), and expenses (like rent or software).

Key Terms to Know:

• Gross Profit = Revenue – Cost of Goods Sold (COGS).

  It shows what’s left after covering the direct costs of producing your product or delivering your service.

• Gross Profit Margin = Gross Profit ÷ Revenue.

  Expressed as a percentage, this tells you how efficiently your business turns sales into profit before other expenses.

Why it matters:

Your P&L is the quickest way to understand whether your business is profitable—or how far away you are from being profitable. Advisors often review it first to understand revenue trends and cost efficiency.

How to act on it:

• Monitor margins. If your gross profit margin is shrinking, you may need to raise prices or cut direct costs.

• Identify cost leaks. Are any categories growing faster than revenue?

• Track trends. Compare month-over-month to identify spikes or slumps.

Action steps for founders:

• Review your P&L monthly and look for any unexpected changes.

• Set a target gross profit margin and benchmark it over time.

• Categorize expenses accurately in your accounting software.

• Share your P&L with your advisory board for insights on cost structure and pricing.

Product Case Study:

A SaaS startup notices a declining gross profit margin. After reviewing the P&L with an advisor, they realize customer acquisition costs are rising sharply. They pause paid ad campaigns and shift to organic marketing to improve efficiency.

Service Case Study:

A consulting firm shows flat revenue and high labor costs. The P&L reveals overuse of expensive subcontractors. The founder raises project fees and streamlines the team’s workload to improve profitability.

Balance Sheet

What it is:

The Balance Sheet provides a snapshot of your company’s financial position at a specific moment. It lists your assets (what you own), liabilities (what you owe), and equity (what’s left for the owner or shareholders after debts are paid).

Key Terms to Know:

• Debt-to-Equity Ratio = Total Liabilities ÷ Shareholders’ Equity.

  This measures how much of your company’s financing comes from debt versus the owner's investment.

• Cash Position = How much cash your business currently holds.

  A strong cash position means you can handle short-term expenses and emergencies without borrowing.

Why it matters:

Your Balance Sheet shows your business’s financial stability and solvency. Advisors use it to assess whether your business can weather downturns or qualify for funding.

How to act on it:

• Check your debt levels. 

  A high debt-to-equity ratio may mean you’re relying too heavily on borrowed money.

• Monitor liquidity. 

  Can your business cover payroll, rent, and vendors with cash on hand?

Clarified Tip:

Avoid over-extending debt without a repayment plan or expected return on investment (ROI). In other words, don’t take out loans or credit lines unless you know exactly how that money will help grow revenue—and when you’ll be able to pay it back.

Action steps for founders:

• Keep your liabilities, like loans and credit cards, up to date.

• Track your assets, including inventory, equipment, and cash balances.

• Review your Balance Sheet quarterly and compare with industry benchmarks.

Product Case Study:

An e-commerce company sees strong sales but low cash. The Balance Sheet reveals excessive inventory that’s tying up working capital. The founder shifts to just-in-time inventory practices, ordering products only as needed to reduce storage costs and improve cash flow.

Service Case Study:

A design agency has positive equity but delayed client payments. Their cash position is weak. They tighten contracts and require deposits to improve short-term liquidity and reduce reliance on credit.

Cash Flow Statement

What it is:

The Cash Flow Statement shows the actual movement of cash in and out of your business—unlike the P&L, which may include revenue that hasn’t been collected yet.

Why it matters:

Even profitable companies can run out of cash. This report helps you understand your operational cash flow (from sales and expenses), investing cash flow (buying assets), and financing cash flow (loans or investor funds).

How to act on it:

• Spot timing gaps. Are you spending money faster than you're collecting it?

• Identify cash drains. Where is your cash going? Can anything be delayed or optimized?

• Forecast problems. Will you have enough cash in 4–8 weeks?

Action steps for founders:

• Build a 13-week cash flow forecast to monitor trends.

• Speed up collections by shortening payment terms or offering early payment discounts.

• If necessary, delay large purchases or negotiate vendor payment plans.

Product Case Study:

A hardware startup prepping for launch has strong pre-orders but is tight on cash. The cash flow statement reveals high upfront payments to suppliers. The founder secures extended payment terms to spread out costs and ease pressure.

Service Case Study:

An IT firm shows late customer payments. The founder automates invoicing and adds penalties for overdue bills, improving the overall cash position.

Statement of Shareholders’ Equity

What it is:

The Statement of Shareholders’ Equity shows how ownership has changed over time. It includes new capital investments, retained earnings (profit not distributed), and any stock issued or repurchased.

Key Terms to Know:

• Retained Earnings = Cumulative profits that are reinvested into the business rather than paid out to owners.

• Dilution = When a founder’s ownership percentage decreases because new shares are issued to investors or employees.

• Equity Statement = A summary of how ownership has shifted, helping track who owns what portion of the business.

Why it matters:

Understanding how your ownership is evolving helps you and your advisors make informed decisions about fundraising, profit reinvestment, and long-term valuation.

How to act on it:

• Track ownership changes. 

  Make sure your cap table reflects all stock issuances and conversions.

• Model fundraising impacts. 

  How will taking on new investors affect your control and share of future profits?

• Reinvest wisely. 

  Use retained earnings strategically for growth initiatives like hiring, marketing, or R&D.

Action steps for founders:

• Keep accurate records of all equity transactions and agreements.

• Use your equity statement to model different growth and fundraising scenarios.

• Discuss ownership goals and exit plans with your advisors.

Product Case Study:

A tech startup raises a follow-on seed round. The equity statement shows the founder’s ownership is dropping with each new investor. With their advisor, the founder structures future rounds to maintain control while fueling growth.

Service Case Study:

A marketing agency builds retained earnings over two years. Instead of taking distributions, the founder reinvests in a content team, creating a new revenue stream that grows faster than the original business.

Pulling It All Together: From Confused to Confident

By learning to pull and interpret these four essential financial reports—Profit & Loss, Balance Sheet, Cash Flow, and Statement of Shareholders’ Equity—you can lead your company more confidently, engage your advisory board with clarity, and grow your business strategically.

Founders:

• Start by reviewing these reports monthly.

• Ask questions and get comfortable spotting patterns.

• Use your advisory board as a sounding board, not just a rubber stamp.

Advisors:

• You don’t need to be a CFO to be helpful.

• Ask founders what’s driving the numbers and where they see opportunities or challenges.

• Use your perspective to support smarter decisions—especially when things get messy.

Financial literacy is not a gate—it’s a growth tool. You don’t need to know everything; you just need to get started.