Balance Sheet Template for Small Business

The profit and loss statement tells you how your business performed over a period. The balance sheet tells you where your business stands right now. Together, they’re the two documents lenders, investors, and informed owners use to understand business health.

The Balance Sheet Equation

Assets = Liabilities + Owner’s Equity

This equation always balances. If it doesn’t, there’s an error.

Assets: What your business owns or is owed Liabilities: What your business owes to others Owner’s Equity: What’s left after liabilities — the net worth of the business

The Structure

ASSETS

Current Assets (converted to cash within 12 months):

• Cash and cash equivalents
• Accounts receivable (what customers owe you)
• Inventory (at cost)
• Prepaid expenses (insurance, subscriptions paid in advance)

Fixed Assets (long-term):

• Equipment (at cost)
• Less accumulated depreciation
• Vehicles
• Leasehold improvements

Total Assets

LIABILITIES

Current Liabilities (due within 12 months):

• Accounts payable (what you owe vendors)
• Accrued expenses (wages owed, taxes owed but not yet paid)
• Short-term portion of long-term debt
• Sales tax payable
• Deferred revenue (payment received for work not yet done)

Long-term Liabilities:

• Long-term portion of business loans
• Equipment financing
• SBA loan balance

Total Liabilities

OWNER’S EQUITY

• Owner’s investment (capital contributed)
• Retained earnings (cumulative profits not distributed)
• Current year net income (from P&L, if not yet closed to retained earnings)
• Less owner’s draws (money taken out of the business)

Total Owner’s Equity

Total Liabilities + Owner’s Equity = Total Assets ← must equal the Assets total above

Building It in Google Sheets

Column A: Line item labels Column B: Current date amounts Column C: Prior period amounts (3 or 12 months ago)

Add a “Change” column: =B3-C3 for each line.

Format sections with bold headers and light background shading to distinguish assets, liabilities, and equity sections visually.

The prior period column is important — a balance sheet at a single point in time tells you a snapshot. Comparing to prior periods shows the trend.

What the Balance Sheet Tells You

Liquidity (can you pay your bills?): Current ratio = Current Assets ÷ Current Liabilities. Above 1.5 is generally healthy. Below 1.0 means current liabilities exceed current assets — a cash flow warning.

Leverage (how much debt?): Debt-to-equity ratio = Total Liabilities ÷ Owner’s Equity. Higher ratios mean more debt relative to equity. Very high leverage increases financial risk during downturns.

Working capital: Working capital = Current Assets − Current Liabilities. Positive means you have a buffer. Negative means you’re relying on future revenue to pay current bills.

Accounts receivable quality: Large AR balances relative to revenue suggest slow-paying customers. If AR keeps growing, investigate whether invoices are being collected or just aging.

Common Balance Sheet Problems for Small Business

Negative retained earnings: The business has lost more money over its life than it has earned. Common in early-stage businesses, but a concern if it’s not improving.

Owner’s draws exceeding net income: If you’re taking more money out than the business earns, equity is declining. Sustainable short-term if retained earnings are large; unsustainable long-term.

Large accounts payable relative to assets: You may be slow-paying vendors due to cash flow pressure. This can strain supplier relationships and credit terms.

No balance sheet at all: Many small business owners only look at their P&L. The balance sheet reveals problems the P&L can hide — like profitable businesses that are cash-poor because receivables aren’t being collected.

Build your balance sheet once per quarter. It takes 30 minutes after the first setup. The discipline of seeing your business’s net worth change over time — growing as you retain profits, shrinking when you over-draw — is one of the most clarifying financial habits a business owner can develop.