BENEFITS OF FINANCIAL AWARENESS
Pay attention to cash flow and your budget.
“80% of small business start-ups across the world fail because of poor cash-flow management.”
Cash flow management requires a plan and a plan requires a budget. In my opinion, in today’s environment, a budget forecast should cover a 3 month period, with a monthly income and expense report issued every month.
One important aspect is the necessity of understanding Accrual Accounting. The principle underlying accrual accounting is matching. The matching principle says that income and expenses should be recorded in the period to which they relate, not necessarily the period in which cash actually changes hands.
Having a lot of money is not a prerequisite to maintaining accurate financial records. Every business must have budgets and cash flow analysis from day one. Budgets enable a business to accurately set goals, priorities, and spending caps, and detail where funding originates and where new strategies might bring revenue into the company coffers.
Financial records serve two purposes. First, they tell you what has happened, and second, they are your main resource in making decisions about your future direction.
Most small business owners don’t have the time or expertise to be their own bookkeepers. Hiring an outside accounting service should be a number one priority. The following are some of the major benefits that accurate financial records bring:
- They let you know how well your small business is doing.
- It tells you if you have enough funds to expand your business or to take advantage of new business opportunities
- It builds trust with vendors and lenders if they know your business is successful.
- Helps identify ways to reduce your tax burden.
Get ready for a profitable 2021 by getting your financial house in order today.
Comments are closed