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Starting Your Business
Business Finance 101
by Chris Parry (Write for us!)
(Click on the links within the article to get definition of that word)
Owning a business can be one of the most rewarding and satisfying ways of meetingfinancialgoals and
ensuring
that a person's future is secure and fulfilling. Today's economyyields many opportunities to people with different
skills and strengths. One of the most basic aspects of running a business that is often left by the wayside is that
of financial management. Usually only an afterthought, it is the financial management of a company that determines
success. The perfectproduct or service doesn't mean anything if the money generated goes into the business only to
be misused or unaccounted for. Spending the money earned wisely and knowing when to save or invest in growth should
be of paramount concern for a business.
Everyone is aware of the fact that most businesses fail within their first year of operation. Often a major contributing
factor that leads to failure is
poor financial management. A review of the financial information for many failed
businesses shows that the business would have actually been quite successful if the owners had just made sound
financial decisions in all aspects of the business. It is always recommended to employ the help of a professional
like a bankinginstitution, financial planner or accountant. However, a business owner should understand, at the
very least, the basic principles regardless of whether a professional is hired or not. This protects the business
and the business owner from fraudulent activities. Keeping up to date with the finances and being aware of the
principles involved will also beneficially affect other aspects of running a business.
For smaller businesses it may not be practical to hire a professional for all of the financial work, but there several
softwareprograms available that help to educate the owner on basic bookkeepingtechniques.
A business owner should be familiar and comfortable with using the following:
Of equal importance is the ability to determine the current financial state of a business and whether expansion is possible or even necessary due to competition. Being able to identify future trends that can positively or negatively impact a business will go a long way toward helping a business develop staying power in ever shifting marketplaces.
Regardless of the size of a business, the goals of the business and the owner should be kept firmly in mind. While smaller businesses may not immediately benefit or be able to afford an accountant that is an expense that should be worked into a budget as
soon as possible. Accountants and even financial planners are able to keep a business on track. They can help to establish realistic long-term goals to increase the chances of success. With the help of a financial professional, cash flowproblems can be spotted and tackled.
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