The One Thing Every Entrepreneur Should Do
Entrepreneurs have an inherent fear of failure. Thus, we will do everything in our power to be successful. With that said it is very interesting how many business owners do not do that one thing.
Keeping track of your finances precisely is the most important thing you can do. This includes budgeting, tracking the cash flow, keeping an eye on expenses, tracking income, and keeping detailed records of all transactions. In other words, every business must implement and maintain a financial system.
There are a variety of reasons why entrepreneurs do not keep track of their finances. They do not realise the importance of financial systems or the benefits that such a system can provide. Some do but it is not a priority because the time is rather spent on running the business. Small businesses do not have the resources to invest in an accounting package or hire an accountant. Many business owners do not have the knowledge and the whole process may overwhelm them.
Many businesses fail because it is difficult to track the revenues, expenses and cash. The result is inaccurate financial records which lead to errors. If cash flow is not managed the business might not be able to meet its short and long-term obligations. Cash flow management is in itself a very crucial activity to ensure financial stability. Data drives decisions, and without data, the business owner is not able to make informed decisions. Every business should comply with accounting and tax laws and regulations. Non-compliance might result in fines and penalties which further strain the cash as well as legal issues.
Here are some steps to follow to implement a financial system:
1. Decide on the system- Many of the shelve or online accounting software packages are available. Paid-for and free packages. Excel templates can also be used.
2. Set up the different accounts – In accounting terms- the general ledger accounts, basically it is the accounts you will use the allocate the income, expenses, assets and liabilities. For example, Rental Income, Sales, stationery, and bank charges.
3. Capture the transactions- Luckily in this day and age software make your life so much easier. You can use Dext to take photos and convert the information into accounting data. Or you can capture the transactions manually.
4. Reconcile the accounts- Reconciliations ensure the data is correct and reliable.
5. Hire an accountant- An accountant will help you to implement the system and provide ongoing support.
A financial system will assist you in making informed decisions and you will have a very clear picture of where the business is at and what action steps to take to improve. It is easier to budget and forecast future cash flows because the transactions are recorded accurately. Creating financial reports is quicker and more accurate. Being and staying compliant is easier. Resource management is more effective and cash flow problems can be avoided and obligations met.
The fear of failure can be turned into a feeling of empowerment by implementing and maintaining a financial system. You will be able to manage the finances more effectively, make informed decisions, ensure the business is on the right track and plan for the future.
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