Balance sheets for non-financial founders: read a balance sheet in 10 minutes

The essentials in 3 points:

• A balance sheet is a snapshot of your SME's financial health at a specific moment: what you own, what you owe and what is left.
• It is divided into three main sections: assets (what the company owns), liabilities (what it owes) and equity (the difference between the two, which belongs to the owners).
• As a founder, focus on 5 key lines: cash, trade receivables, trade payables, equity and the profit or loss for the year.

You run an SME in Switzerland, receive a document entitled “balance sheet” every year and nod along in meetings with your fiduciary. Yet you are not always sure what these figures say about your business. That is normal. A Swiss SME's balance sheet is not just for accountants: it is a practical management tool, and explaining it comes down to a few simple concepts. This guide helps you understand your balance sheet in 10 minutes, with no financial background required.

In Switzerland, the obligation to prepare a balance sheet is laid down in the Code of Obligations (CO), articles 957 to 963. Every company entered in the commercial register must keep accounting records and present annual accounts comprising a balance sheet, an income statement and notes. Whether you are the founder of a limited liability company (Sàrl) with 5 people or the CEO of a company limited by shares (SA) with 40 employees, this obligation applies to you. Rather than simply putting up with it, you might as well understand it.

What is a balance sheet, really?

Forget academic definitions. Think of your balance sheet as a photo of your business taken on 31 December (or on your financial year-end date). This photo shows three things:

1. What your company owns: money in the bank, invoices your customers still have to pay, equipment, premises.
2. What your company owes: supplier invoices to be paid, bank loans, salary provisions, VAT due.
3. What is left: the difference between the two is the company's net worth. This is what belongs to you as the owner.

A useful analogy: think of your balance sheet as a flat. The assets are the value of the flat. The liabilities are the mortgage. The equity is the share you actually own, free of any debt. If your flat is worth CHF 800'000 and your mortgage is CHF 500'000, your equity is CHF 300'000.

The fundamental rule is always the same:

Assets = Liabilities + Equity

This equation always balances. Always. If it does not, there is an error somewhere. That is why it is called a “balance sheet”: the two sides balance.

How is a balance sheet structured: assets, liabilities, equity?

A Swiss balance sheet complying with the CO (art. 959a) is presented in two columns (or two successive blocks). Here is what each section contains, translated into everyday language.

Assets (left-hand side): what the company owns

Assets are divided into two categories:

Liabilities (right-hand side, upper section): what the company owes

Equity (right-hand side, lower section): what belongs to the owners

This is your company's net worth. It includes share capital (the amount invested at incorporation, a minimum of CHF 20'000 for a Sàrl, CHF 100'000 for an SA), reserves (accumulated profits from previous years) and the profit or loss for the year (the current year's profit or loss).

If equity is positive, your company is “worth” something beyond its debts. If it turns negative, that is a serious warning sign: the company owes more than it owns. In Switzerland, art. 725 CO also requires specific measures when half of the share capital and statutory reserves is no longer covered.

To organise these lines consistently, each balance sheet item is assigned an account number. We have published a comprehensive guide to the Swiss SME chart of accounts that explains this structure in detail.

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Which 5 lines should every founder look at first?

You do not need to analyse every item on your balance sheet. Five lines are enough to take the pulse of your business.

1. Cash (liquid funds)

This is the amount held in the bank and in cash. The fundamental question: how many months of fixed costs can you cover without any money coming in? If the answer is “less than two months”, you need to act. An SME can be profitable on paper and still run short of cash day to day.

2. Trade receivables (debtors)

These are invoices issued but not yet paid. A high amount can mean two things: either your turnover is growing (positive), or your customers are paying late (problematic). Pay particular attention to the age of receivables. Beyond 90 days, the risk of non-payment increases sharply.

3. Trade payables (short-term creditors)

What you owe your suppliers. Compare this with your cash. If your trade payables far exceed your liquid funds, you have a timing problem: money is going out faster than it is coming in.

4. Equity

Your company's net worth. Watch whether it increases or decreases from year to year. Steadily rising equity means your company is building value. A constant decline is a signal to take seriously.

5. Profit or loss for the year

The last line of equity: the year's profit or loss. This is the direct link between your balance sheet and your income statement. A profit strengthens your equity. A loss erodes it.

How do you read changes from one balance sheet to the next?

A balance sheet in isolation tells you little. Its real value emerges when you compare it with the previous one. This is also a requirement of the CO (art. 958d): annual accounts must show the previous financial year's figures for comparison.

Here are three practical questions to ask yourself when comparing two balance sheets:

Has my cash increased or decreased? If your liquid funds are falling while your turnover is rising, this may indicate a timing gap between receipts and payments. Check your trade receivables: they have probably grown.

Has the nature of my debt changed? Turning short-term debt into long-term debt (for example through a bank loan) can ease pressure on your cash flow. The reverse, however, is a sign of strain.

Is my equity growing? If you reinvest your profits in the business, your equity should grow. If you distribute everything as dividends each year, it stagnates. Both choices are legitimate, but you must make them consciously.

This comparative reading is particularly useful during the mid-year accounting close, an ideal time to correct course before the end of the financial year.

When should you ask an expert for help?

Understanding your balance sheet does not mean doing everything yourself. Some situations require a professional eye:

• Your equity falls below half of your share capital. Art. 725 CO then requires the board of directors (or the management of a Sàrl) to take action. Your fiduciary can guide you through the steps to follow.
• You are preparing to raise finance. A bank or investor will analyse your balance sheet in detail. An expert can help you present it clearly and anticipate questions.
• You do not understand an item. Provisions, accruals and deferrals (prepayments and accrued liabilities), depreciation and amortisation: these accounting mechanisms are technical. Asking your fiduciary is always better than making a risky interpretation.
• You manage payroll in-house. Social security contributions (AVS, LPP, LAA) appear on several lines of the balance sheet. Our guide to Swiss payroll, Swissdec and LPP explains how these elements fit together.

A fiduciary's role is not to keep you at a distance from your figures. It is to make them understandable. And the better you understand your balance sheet, the more productive your discussions with them will be.

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Frequently asked questions

What is the difference between a balance sheet and an income statement?

The balance sheet is a snapshot of the financial position on a given date: what the company owns and what it owes. The income statement, meanwhile, shows the film of the year: income, expenses and the profit or loss over a period. The two documents complement each other and are mandatory under the CO (art. 959b).

How often must a Swiss SME prepare a balance sheet?

At least once a year, at the end of the financial year (art. 958 CO). In practice, many SMEs prepare an interim balance sheet at mid-year to manage their business. Banks may also require quarterly balance sheets as part of a loan arrangement.

What does negative equity mean for my SME?

Negative equity means that your company's debts exceed the value of its assets. This is a critical situation. Under Swiss law (art. 725 CO), if half of the share capital and statutory reserves is no longer covered, the board of directors must convene a general meeting and propose restructuring measures. In cases of clear overindebtedness, notifying the court may be mandatory.

Does my balance sheet need to be audited?

That depends on the size of your company. In Switzerland, SMEs that do not exceed two of the following three thresholds for two consecutive financial years can choose to opt out (waiver of the limited audit): total assets of CHF 20'000'000, turnover of CHF 40'000'000 and 250 full-time positions on an annual average (art. 727a CO). Most small Swiss SMEs are therefore not subject to a mandatory audit, provided all members or shareholders consent.

Last updated: 15 July 2026

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