When you find yourself overwhelmed by everything you need to do to start your own business, it’s all too easy to put off accounting for later. After all, you are just beginning and you think that it is not necessary to learn how to manage finances.
The problem is that doing it later could be too late to save your business. For this reason, one of the first activities that you should take into account is to know how to manage finances of your company from the beginning.
Regular reports will not only alert you to potential problems, they will also help you visualize the best path for growth.
(If you are freelance and want to learn how to manage your finances, you need to read this)
Even if you don’t intend to do it yourself, you’ll need to understand what your accountant does; so that you participate in the financial health of your project.
How to manage the finances of your company.
You must first acquire financial knowledge in at least three basic reports.
- Profit and loss: Shows income and expenses over a period of time.
- Balance sheet: Provides a statement of the company’s liabilities, assets, and global capital at a given date.
- Cash flow statement: It shows how much cash the business has after accounting for all expenses.
Also read: Balance sheet: What it is and how to do it (Step-by-step guide with example)
Doing the analysis of the information mentioned above may seem simple. However, it can become a very confusing practice; especially if your business has good cash flow.
With high volumes, it can be difficult to determine who exactly owes you what and when they are due to pay it. You also need to understand what resources are available to you if there are customers with late payments; to act quickly and collect that money.
Watch your debts.
At the same time you must be very careful with the payment of your debts. Even if your instinct tells you that you must make the payments immediately; this could leave you short of cash.
Also read: How to avoid having debts.
This would not only hurt your position with potential investors, it could also affect the injection of future capital. Investors don’t like entrepreneurs who don’t know how to manage cash flow.
Advantages of learning how to manage your company’s finances.
The benefits of keeping your company’s accounts very well go beyond keeping your company afloat financially.
You can use these reports to project growth and move into a maturity phase. Making budgets and projections becomes an easier task when you have solid financial information and obviously the support of an expert.
If you have an accounting background, you may be tempted to handle these processes yourself. However, we advise you to resist doing so.
Also read: Balance point. What is it and how to calculate it.
Adding accounting responsibilities at the start is a move that is likely to lead to failure; due to the workload you will have. Even if you decide to do it, make sure you delegate these activities in the shortest amount of time possible.
We advise you to partner with an accounting service provider from the start. If you don’t have money for that, do it with a relative or acquaintance who has the knowledge; Agreeing on a payment that is more in line with your possibilities. This will help you establish good accounting practices early on.
And remember, if you are really interested in creating your own business and want to find more information on this subject, buy our book “How to create a company while you work. Discover how to manage your time, manage your money and motivate yourself while creating a company and working for another” , where you will find all the information you need to found your own company, without having to leave your job.
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