You need to be able to keep your books and manage your money in an effective manner if you want to sustain and grow your small business.
You could always hire somebody to manage your finances for you. Doing so, however, does not ensure the safety of your finances, and puts your books in a state of jeopardy. You can never really know which financial managers are truly interested in seeing you and your business go on to bigger, better things, and who wants only to take advantage. Luckily, once you get the hang of it, you will be able to book-keep with the best of them, and will no longer need somebody else to do it for you.
- Of course, the first step in successfully managing your organizations money is knowing how to manage the books. Basically, all you will be doing is keeping a record of you financial transactions. This can be done by whoever does the basic clerical work within your business. In the beginning, you will use a cash-basis accounting system. In the little “memo” column of your checkbook, you will write down which portion of a check is an expense or revenue, where that amount originated, and where it will go. As time goes on, you will need more journals. You will probably need a cash receipts journal and a cash disbursements journal. Eventually, your business will grow, and you will acquire even more journals for payroll, accounts receivable, accounts payable, sales, purchases, and general ledgers.
- Keeping the books is more than just writing down transactions—you need a budget so you know how much you can safely spend. Review objects achieved, your comparing budget, and the actual figures. Discuss any new goals, and create a financial strategy that will help you reach them. Estimate the cost of the plan. This includes the cost of your staff, resources, and supplies. Budget your expenses and your income as well. There will always be accidents and unplanned expenditures along the way. Using your company’s financial history should allow you to generate a relatively accurate budget. Just make sure that you have a safety cushion to deal with any unexpected setbacks.
- You also want to go over your financial statements to see where your small business stands. Going over your account activities by organizing and scrutinizing your statements will help you develop a vision of your company’s future. You ought to have two basic financial statements in play, here: A Balance Sheet, and a Profit and Loss Statement. Profit and Loss statements show you your overall profits, including how much revenue you accumulated and how much of that amount you spent. In essence, the “P and L” statement shows you your total sales minus your total expenses.
- Alternatively, balance sheets illustrate the status of your finances, overall, at a specific time. It tells you your business’ net worth by subtracting your liabilities from your assets. A healthy balance sheet will help you should you ever need to apply for funding.
By employing healthy financial management tactics, you will ensure that your company will grow and succeed.