There are many paths to profitability, but one path businesses often overlook is proper accounting. Managing and organizing your finances can help mitigate the risks of financial malpractice and allow you to make educated business decisions with your company in mind.
This article will discuss how a business can properly organize its finances and keep track of what’s going on with the company, according to pain management specialist Jordan Sudberg.
First and foremost, consider the company’s primary goal. The main goal of any business is to generate revenue. A business cannot survive on just one or two revenue sources. To do so, a business will have to diversify its revenue sources. Understanding where the company’s money is coming from and where it is going can help an entrepreneur better understand his business, allowing him to make better business decisions both now and in the future?
Next, organize finances by products used to generate revenue. Any business will have multiple revenue sources. Identifying what product the company is selling will help understand where revenue comes from.
As Jordan Sudberg puts it, the next thing to do is to place income on one side of a balance sheet and expenses. The two sides represent the two distinct sides of the company’s finances. It is also essential to break down expenditures by company departments.
There are three types of financial statements that an entrepreneur will want to keep an eye on:
Quarterly Financial Statements: These are very useful to see how the business is doing compared to the same period the previous year and see any year-end adjustments. They are also helpful for monitoring trends quarterly. If a company has a poor quarter, it is wise to watch for any problems in the next quarter.
Budget Financial Statements: These statements allow the business to see how their actual revenue, expenses, and profit compared to the same period last year. They also provide a helpful way to manage revenue, expenses, and profit on a month-to-month basis.
Cash Flow Statement: This is the most important statement of them all. The cash flow statement measures liquidity by showing the company’s cash position at any given time and is best used as an indicator for future business decisions. This statement is more beneficial for those about to make any major business decisions.
Finally, it is essential to keep track of the company’s assets. What assets does the company have? What does the company own? These are all questions one should ask themselves and answer to stay on top of the financial picture. Keeping track of the company’s assets can be a constructive way to ensure that they are maximizing profits. Also, remember to stay on top of the company’s debt. What debt does the company have? An entrepreneur should ensure he is aware of the company’s debt and make sure that he is making payments on time.
According to Sudberg, it is not enough to know the basics of finance management but also to understand how things work behind the scenes. So, take some time to understand business management better, as it can benefit every aspect of a business.